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KDN eyes equity investors to cut losses

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Workers lay a KDN fibre optic cable in Nairobi. It’s not clear whether the company will create new shares to accommodate the investors or the principal shareholders will cede its shares to the targeted owners, whom analysts reckon is likely to be a private equity fund. FILE

Workers lay a KDN fibre optic cable in Nairobi. It’s not clear whether the company will create new shares to accommodate the investors or the principal shareholders will cede its shares to the targeted owners, whom analysts reckon is likely to be a private equity fund. FILE 

By MARK OKUTTAH

Posted  Tuesday, June 5  2012 at  19:06

Telecoms infrastructure firm Kenya Data Networks (KDN) has kicked off the search for equity investors to inject cash and help it recover from losses.

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Altech of South Africa, which owns 60.8 per cent stake, says it needs new capital to shore up its Kenyan business that is facing stiff competition from rivals Wananchi Telecoms, AccessKenya and Telkom Kenya.

“Altech will retain its investments in Kenya, but is looking at equity partners to inject money into the business in order to take it to the next level of positive growth,” Altech said in a statement quoting its CEO Craig Venter.

“Further announcements in this regard will be made when appropriate,” the South African firm added.

It’s not clear whether the company will create new shares to accommodate the investors or the principal shareholders will cede its shares to the targeted owners, whom analysts reckon is likely to be a private equity fund.

Besides Altech, the other key shareholder in KDN is Sameer ICT, which is associated with businessman Naushad Merali. Sameer ICT owned 96 per cent of KDN while its former CEO Kai Wulff held a four per cent stake, until 2008, when Altech bought a 51 per cent share in the company. The South African increased its ownership to 60.8 per cent in 2009.

KDN reported a drop in revenue from Sh3.2 billion to Sh2.1 billion for the six months ended August 31, while operating profit dropped from Sh657.2 million a year ago to Sh12.6 million.

Atul Chaturvedi, the chief commercial officer of KDN says the company has in the past year dropped into losses on high cost and stiff competition.

Their market share has also dropped to 33.4 per cent in December from 36.2 per cent in September based on subscribers, according to data from the Communication Commission of Kenya (CCK), but its remains the top internet firm in Kenya ahead of Wananchi Telecoms and Access Kenya.

Wananchi Telecoms seems to be the biggest beneficiary of the market share shifts after it increased its market share to 23.5 per cent in December from 14.25 per cent in September.

Last week, KDN shed 51 jobs to cut costs in the increasingly competitive telecoms market that has seen the company slide into losses.
“The objective of the reduction is to reduce the company’s cost base in light of the current demanding market conditions,” said Shahab Meshki, the chief executive of KDN in a statement last week.

Its parent company, Altech, has blamed its poor performance on its East African and West African units, which pushed it to losses of Sh5 billion. “KDN, specifically, is trading below expectations and has been heavily impacted by the cancellation of a major client’s dark fibre business,” read its 2011 annual report in part.

Our sister publication, the Daily Nation, has traced the poor show of its Kenyan unit to the loss of a multi-million shilling contract with Safaricom last year.

Safaricom CEO Bob Collymore told the Daily Nation on Monday that the telecom had sought alternative infrastructure for some of its businesses, but attributed this to changing management priorities.

“KDN was moving towards managed services. We simply wanted dark fibre. We have had to move quite a bit of our business elsewhere, but we are still working with them,’’ said Mr Collymore.

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