Econet unit makes strategic Africa acquisition

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Nic Rudnick

ECONET subsidiary, Liquid Telecom has become Africa's largest operator of terrestrial cross-border fibre optic networks after acquiring the East Africa businesses of South African technology giant Allied Technologies (Altech).

In a statement Tuesday, Johannesburg Stock Exchange (JSE) listed Altech said it had offloaded its loss-making East Africa operations to Liquid in exchange for an 8.6 percent interest in the firm.

This is the second joint venture move between Altech and Econet after the JSE listed firm acquired a 50 percent stake in Econet Wireless in 2004 only for the deal to collapse within months over management differences.

But the latest tie-up between the firms is expected to help “expand Liquid’s networking footprint and create the largest single fibre network in Africa, spanning Kenya, Uganda, Rwanda, Zambia, Zimbabwe, Botswana, DRC, Lesotho and South Africa”.

Said Liquid CEO Nic Rudnick: “Liquid has been building and investing in a high-quality pan-African fibre network for many years and this deal will accelerate our progress by enlarging our network footprint and complementing our existing product portfolio.

“We are a strong and ambitious company and have a long-term investment plan for the region. The compatibility and complementary nature of Liquid and Altech are important features of this strategic alliance – notably with regard to the use of Altech’s multimedia technologies and products, as we extend our value chain to the retail data markets in Africa.”

Altech said the partnership gives it an interest in a “highly successful and profitable African data network operator and extends Liquid’s network from southern and central Africa to East Africa as well – in the process helping to create a Pan-African operator”.

“As shareholders are aware, our East African activities have, in recent years been problematic and unprofitable, and we have previously expressed our intention to deal effectively with these challenges.  The Liquid transaction opens up a positive new chapter for Altech, in partnership with a group with proven expertise in its sector,” said Craig Venter, Altech's CEO.

“During the past two years we have sustained substantial losses and impairments on our East African assets. However, as a consequence of this transaction these losses will now discontinue and we can anticipate attractive returns on our investment in Liquid, says Mr Venter.”

He added that  “Altech has already announced an agreement for the disposal of its loss-making Altech West Africa operation and the combination of these two transactions should put Altech firmly back in its more normal growth patterns of the past.”

“A significant benefit to Altech is that we will be able to refocus more intensely on our core competencies and return the group to its positive growth model as reflected in our traditional activities, which are all substantially profitable. The benefit is demonstrated by a positive impact on pro-forma headline earnings.”

Back in 2004, Altech shelled out US$70 million for half of Econet in 2004 in a deal that however, excluded the telecoms company’s Zimbabwe operations.

But the joint venture collapsed within months over "irretrievable differences" with Masiyiwa buying back overall control of the firm for about US$88 million.