Listed telecoms and multimedia and information technology (TMT) group, Allied Technologies Ltd. (Altech) has joined forces with global mobile networks operator, Econet, to form Newco, a company which is set to be a long-term influential player in the African and global cellular market.
Introducing the new company to the industry last week, Altech CEO, Craig Venter, said that as early as 2002, the company identified Econet as its opportunity for growth into the global market. “In order for Altech to continue to grow significantly, it will have to globalize and this venture is a perfect fit within our TMT and globalization strategy, as Econet is an ideal entry point for Altech into mobile network operations, with its base of high-growth operations in Africa,” he adds. In a US$70 million deal, Altech has entered into binding agreements with the Econet Wireless Group (EWG) of companies for 50 per cent of its equity.
The new company will be jointly controlled by Altech and Econet, and will be headed by Econet’s founder and CEO, Strive Masiyiwa. Newco will be South Africa (SA)-based, and will contain the telecommunications interests of Econet and cash funding from Altech. The Econet assets will be restructured so as to achieve and consolidate control through Econet Wireless Group — a Botswana resident which will be a wholly-owned subsidiary, although Newco hopes to dilute this to an 87.5 per cent stake. The new company will have equal board representation from both parties, and will be controlled on a consensus basis via a voting pool agreement. Altech and Econet will jointly participate in operational management structure.
Econet brings into this deal its expertise in network operations, while Altech will contribute to the new company’s financial discipline, marketing and corporate governance.
Econet currently has operations in the UK, Bermuda, Nigeria, Botswana, Zimbabwe, Lesotho, Kenya and New Zealand, although the deal does not include the Zimbabwean operation, due to the political situation in that country, and the fact that funds generated in Zimbabwe cannot be repatriated to SA.
With the cash injection by Altech, Masiyiwa says the next step is to expand these operations and extend Econet’s influence into Africa through Newco.
In rationalizing Econet’s decision to partner with Altech, Masiyiwa says the company aims to consolidate and assume control of its existing operations.
“We want a minimum of 50 per cent ownership of all our existing operations, and need to consolidate our position in these businesses,” he explains.
He says the company is also looking at new opportunities and technologies that will further enhance Econet’s value.
“We are especially focusing on expanding our New Zealand operation with the third-generation (3G) license that we hold there,” Masiyiwa adds.
He says that Econet has no intention of becoming a fourth local network operator, should the SA government make the offer, but also warned that SA should be on the look-out for Newco should a 3G license be available locally.
“We are currently the smallest operator in world to own a 3G licence, these types of licenses are usually attained by the bigger operators as they are so expensive,” he adds.
Though it looks as if the sky is the limit for Econet and its operations globally, it still has to deal with its battle with Vodacom for the control of Nigerian operation Econet Wireless Nigeria (EWN).
When asked if Altech has any reservation about partnering with Econet at a time when it is involved in a legal battle, Venter said Altech is in no way involved in the litigation process going on between its partner and Vodacom.
“We have enjoyed a good relationship with Vodacom thus far and there is no reason why it should not continue. Strive is protecting his company’s interests, and this does not in anyway affect this deal,” he adds.