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Merali cuts KDN stake as South African firm exits

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Naushad Merali will now hold a 20 per cent stake in Kenya Data Network (KDN) after the deal. Photo/FILE

Naushad Merali will now hold a 20 per cent stake in Kenya Data Network (KDN) after the deal. Photo/FILE  Nation Media Group

By MARK OKUTTAH

Posted  Tuesday, January 29  2013 at  18:28

In Summary

  • The South African firm has sold its 60.8 per cent stake to Liquid Telecom — the UK-based firm that offers data, voice and wholesale Internet in developing countries.
  • The filings indicated that the UK firm will control 80 per cent of KDN, suggesting that Mr Merali, who holds a 39.2 per cent, has cut his ownership in the company he helped found to 20 per cent for an undisclosed fee.
  • Altech will own a 8.6 per cent stake in Liquid Telecoms in the share swap transaction, but the disclosure did not reveal how Mr Merali will be compensated for his stake in the company that has been struggling in Kenya’s competitive IT market.

Businessman Naushad Merali has ceded a 19.2 per cent stake in Kenya Data Network (KDN) in a transaction that has seen South Africa’s Altech sell its majority stake in the Internet firm to a UK company.

Regulatory filings with the Johannesburg Securities Exchange (JSE) where Altech is listed indicated that the South African firm has sold its 60.8 per cent stake to Liquid Telecom — the UK-based firm that offers data, voice and wholesale Internet in developing countries.

The filings indicated that the UK firm will control 80 per cent of KDN, suggesting that Mr Merali, who holds a 39.2 per cent, has cut his ownership in the company he helped found to 20 per cent for an undisclosed fee.

The law requires telecoms firms to have at least 20 per cent local ownership and this means Mr Meralli has lowered his stake to the minimum limit following share sales that have earned him nearly Sh6 billion since 2008.

Altech will own a 8.6 per cent stake in Liquid Telecoms in the share swap transaction, but the disclosure did not reveal how Mr Merali will be compensated for his stake in the company that has been struggling in Kenya’s competitive IT market.

“Altech has concluded agreements relating to various transactions involving Liquid Telecommunication in terms of Altech holding an initial 8.6 per cent of Liquids issued share capital,” said Altech in disclosures to the JSE.

“Post transaction, Liquid will own the following percentages in the various companies —KDN (80 per cent). This places Liquid in a sound position to further develop these businesses,” added the filing.

Liquid operates fibre infrastructure, primarily in southern and central Africa and is majority owned by Econet Wireless Global, the company founded by Zimbabwean telecoms tycoon Strive Masiyiwa.

Mr Masiyiwa is not new to Kenya. He won the rights to launch the country’s third mobile phone network in 2003 under Econet Kenya and in 2008 sold his stake to India’s conglomerate Essar, which launched yu Mobile.

The Kenyan unit has lost market share and sales mainly due to the loss of big contracts including the multi-million shilling contract with Safaricom in 2011 — a move that has seen KDN along with Altech’s West Africa operations hit earnings of the parent company.

Altech has also inked an agreement to sell 75 per cent of its interest in the West African unit.

KDN’s market share dropped to 29 per cent in June from 36.7 per cent in September 2011 based on subscribers, according to data from the Communications Commission of Kenya (CCK), but it remains the top Internet firm in Kenya ahead of Wananchi Telecoms (27 per cent) and AccessKenya (14 per cent).

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