London — The emerging deal that puts all the CDMA operators into a single pot with a US$200 million capital investment has been represented as the creation of a new mobile voice operator. This rather misses the point of its proposed strategy that will emerge when the deal is finalised. Russell Southwood seeks to look behind the wall to see what's coming.
No-one was more surprised than I was to hear that Kevin Maxwell, son the late UK tycoon Robert Maxwell, was leading an investment vehicle interested in buying the Multilinks fibre network. The latter is probably the second largest fibre network after MTN's and has access to many parts of the MTN network through capacity swaps signed by its previous owner Telkom South Africa.
The second great asset CAPCOM wants to acquire is 20 Mhz of spectrum in the 1900Mhz frequency that will allow it to become the first national LTE broadband operator. It wants to become a national broadband operator, taking the existing 2012 base of 160,000 data consumers each paying US$24-32 a month to a base of 2.5 million customers by 2016.
The digital dividend in Nigeria will be long delayed. Based on industry survey work, there are 19.1 million households with TVs. Even optimistically, only 0.5-0.7 million have digital set-top boxes so the process will not be complete any time soon. Potentially this gives CAPCOM a jump start in the race to LTE, whilst others either have to use less favorable spectrum or cool their heels until the digital dividend re-allocation is finally carried out.
For as the company document states:" With other competitors each constrained by having not more than 10Mhz of spectrum, currently congested with voice and SMS traffic, Starcomms is poised to become the market leader in mobile high speed broadband services."
Meanwhile, the Government and the Central Bank can breath a sigh of relief at having avoided a string of embarrassing mobile telecom operator bankruptcies. And the Central Bank gets to offload some of those embarrassing investments previously made by private banks.
A company document states that:"The $200 million investment funds the acquisition of Multi-Links and MTS; recapitalises Starcomms and provides it with sufficient capital and liquidity to finance its existing creditors and working capital; and permits it to expand its existing network through the introduction of 4G/LTE technology to become a major provider of Broadband services to Nigeria's burgeoning consumers."
It intends to offer triple play services and create an offering that can aimed squarely at Nigeria's significant middle class, particularly in Lagos, Abuja and Port Harcourt. The spread of towers put up to run the three CDMA networks will give it a unique, local access delivery network.
The US$200 million is split into US$50 million to buy Starcomms PLC and US$150 million in equity from Capcom's shareholders. Capcom will be owned by: Gibraltar-based MBC (53%); Middle East Capital Group (25%); Helios Investment Partners (11%); Oldonyo Laro Estate (5%); Bridgehouse Capital (3%); Asset Management Company of Nigeria (AMCON) (2%); and private equity investors (1%).
Who, you must be asking yourselves, are all these people? Little is known about MBC but It would be a reasonable guess to assume that it was Kevin Maxwell's investment vehicle: it says it has US$1.25 billion invested in emerging markets. Helios is the investor that took over Multilinks after contract payment dispute with the former owner. It manages funds in excess of US$1.7 billion and has amongst its investors, the IFC, the commercial finance arm of the World Bank.
Middle East Capital Group is a Lebanon based investment company, majority owned by First National Bank of Lebanon. Oldonyo Laro Estate is an exclusive tourist destination in Kenya owned by Dane Jan Bond Neilsen, who is quoted as saying it is "never expected to make a profit." Bridgehouse Capital is described as an Isle of Man based. AMCON was set up by the Nigerian Government to handle non-performing assets of Nigerian banks.
The proposed Chair of the new company is Stefan Allesch-Taylor, a financier and wheeler-dealer who sees himself as a "financial engineer". He owns Nordfinanz Bank AG, is a partner in Clearbrook Capital Partners LLG, was a co-founder of Coffeesmiths and Executive Producer of the film Africa United. Proposed Deputy Chairman is James Dodd, Managing Director of Anthem Capital. During the 1990s he was closely involved in the privatization of telcos from the banking side.
The current interim Chief Executive Officer of Multi-Links Nigeria is expected to become the CEO, whose background is in the engineering side of telecos. The company is proposing Nicholas Topham becomes Director of Operations and Strategy. He has done several years in telecoms consultancy and was Head of Strategy and Business Development for BT.
The challenge for this team will be to get to grips with the considerable challenges of operating in Nigeria. It not only needs to have the assets to become a major broadband player but also have Nigerians who can actually deliver the promise on the ground.