Lesley Stones
19 November 2008
Johannesburg — CONSOLIDATION among cellular network operators in Africa will be so intense that no more than three to five will survive, predicts Zain Africa's CEO Chris Gabriel.
As competition intensifies and profit margins begin to flag, Africa is likely to see its collection of more than 100 operators whittled down rapidly.
Many regulators say three to five rivals are needed in each country to create a competitive environment, but Gabriel thinks the same handful of players will dominate in every country.
Zain expects to be one of them, especially since it is sitting on $4,5bn raised in a recapitalisation scheme to fund its expansion. Zain operates in 22 countries and aims to finalise three or four more acquisitions in the next 12 months.
"We are shopping. We are looking to grow our footprint across Africa and the Middle East," Gabriel said at the AfricaCom conference in Cape Town yesterday. In the global slump, the value of potential acquisitions had tumbled, and Zain had lowered its bids for some companies that it was already negotiating with.
Deals were taking longer to conclude, since there was now a vast difference between the previous value, the current value, and the expectations of the sellers.
SA has been on Zain's radar for years, and it is assessing opportunities to acquire a majority in a telecom or technology company.
"We are exploring all potential opportunities in SA, be they acquisitions of existing players, mergers with existing players or acquisitions of greenfield licences. We are looking for a majority share of about 60% but a minimum of 51%," Gabriel said.
Zain is aware of the recent landmark legal ruling that granted hundreds of voice and data carriers the right to build their own telecoms networks, since it could acquire or partner with one of those players.
Gabriel refused to say whether Zain was also talking to Telkom, which will be bereft of a mobile partner once it sheds its share in Vodacom.
A tie-up there could make enormous sense, since Telkom is eager to expand further into Africa, and Zain is already one of the continent's major players. Many African countries have a cellphone penetration rate of just 18% while SA is nearing saturation. But Gabriel does not believe it is too late to make a debut in SA.
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