S. Africans raise stake in KDN, replace its executive

South African technology firm Altech has increased its stake in internet infrastructure firm, Kenya Data Networks (KDN), causing major realignments in the company that have culminated in the replacement of its chief executive Kai Wulff.

Allied Technologies Limited’s (Altech) latest financial report indicates that its stake in KDN has risen to 60.8 per cent after it bought nine per cent shares in addition to the 51 per cent stake it has held since 2008.

Top managers at KDN and Swift Global — two companies widely seen as pivotal players in Kenya’s ICT space — have consequently been put on a fast-paced restructuring programme and replacement of their CEOs.

Mr Wulff, KDN’s straight-speaking CEO will now head the company’s newly formed Altech Stream East Africa division – the largest data network infrastructure provider in East Africa.

The new position gives Mr Wulff a much wider portfolio that includes overseeing KDN, Swift Global, Infocom Uganda, and Altech Stream Rwanda.

A South African with a background in television has replaced Mr Wulff in the corner office at KDN — signalling a possible change in the company’s focus.

Altech says in its financial statements that it has undertaken a “year of consolidation and rationalisation for Swift Global (Kenya), across its products and services and integrated its technical platforms into KDN’s infrastructure.

That move has effectively ended the short-lived tenure of Mr Aggrey Mahadhana as the chief executive of Swift Global – an Internet service provider.

In the past one year, KDN also lost some of its senior executives, among them Mr David Owino, the chief commercial officer.

Reports also indicated that a third high level executive resigned this week, citing incongruence with the firm’s new vision.

“The company appears to be changing its strategic focus and that makes it very difficult for executors of the current roadmap to fit in,” said a source, who declined to be named because he is not authorised to speak for the firm.

The change of guard at KDN is the latest in the continuing transformation of corporate Kenya with high level replacements in boardrooms and executive suites.

A number of chief executives in finance, consumer goods and manufacturing firms have resigned or taken up new assignments.

Mr Kuria Muchiru, a senior partner at PricewaterhouseCoopers (PwC), reckons that there is a strong correlation between high executive turnover and pressure for better results in the corporate world.

The latest shifts at KDN and Swift Global are largely attributed to a string of acquisitions and share swaps that have changed the balance of power in the companies’ boardrooms.

Increased buy-ins by South Africans into the companies that were founded in the 90s by Kenyan tech-preneur Richard Bell is the main driver of the changes.

The company’s latest financial statements indicate that significant restructuring took place in the portfolio managed by Altech Stream East Africa through additional injection of capital into KDN.

Sameer ICT owned 96 per cent of KDN while Mr Wulff held a four per cent stake, until 2008, when Altech bought a 51 per cent share in the company.

Altech now owns 60.8 per cent of KDN. Altech’s 2008 involvement gave the company the much needed Sh1.3 billion capital injection with a promise of a new corporate structure and discipline.

The South African firm increased its stake to 60 per cent last year after KDN acquired Altech Rwanda.

“In addition, Altech has acquired a further 1.8 per cent (voting) shareholding in KDN from a KDN minority shareholder, for approximately Sh255 million,” says the financial statements.

The company says 50 per cent of the shares will be paid for in cash over two years on the achievement of profit targets.

The remaining 50 per cent will be paid in Altech shares, which are subject to a phased-out release process over three years.

Altech has committed a further $39.5 million to the company since the buyout that is mainly targeted at network expansion to reposition KDN as a key provider of broadband in East Africa.

KDN is one of the top contenders for data infrastructure market in Kenya, with a nationwide fibre optic network.

The company has recently extended its footprints to landlocked Uganda and Rwanda, offering them the critical link to the world of high speed internet through the undersea fibre optic cables.

To tighten its grip on the market, KDN has crafted an extensive roll-out plan in the next couple of years that it hopes will enable it to capitalise on the explosive growth opportunity that growing data carrier demand offers in the region.

KDN raked in Sh4 billion for Altech in the year under review, up from the Sh3.4 billion recorded in 2008, mostly attributed to the strong growth in the Kenyan ICT sector and further developments in the Kenyan fibre industry.

This growth is expected to continue, supported by KDN’s strong position as the infrastructure provider of choice in Kenya and its expanding network in neighbouring Uganda and Rwanda.

Altech Stream East Africa has proven to be a sound investment for Altech, contributing 20 per cent of the group’s total operating profit.

The South Africans plan to diversify their profit contribution so that they have limited reliance on any one entity.

“We foresee that East Africa will be responsible for an even larger portion of profits in the near future. East Africa will remain our main focus, we are currently bedding down the investment before we potentially roll-out the Altech business model elsewhere in Africa,” said Altech CEO, Craig Venter.