Africa Export Import Bank (Afreximbank) has concluded arrangements to extend a loan facility of $62 million (N9.7 billion) to new owners of Starcomms, Capcom to facilitate the acquisition of the latest fourth generation (4G) technology.
Capcom plans to invest $210 million, consisting of selected assets of Multi-Links and MTS, two Code Division Multiple Access (CDMA) operators valued at $112 million and $98 million in cash into Starcomms as part of the proposed transaction.
Starcomms has since issued shares representing 90.5 per cent of the total new share capital to Capcom in exchange for its investment and is awaiting regulatory approvals.
Investigations by LEADERSHIP show that the African regional bank would fund a large part of the transaction with the sale of Multi-Links Limited fibre cable assets to Suburban FibreCo, a broadband operator with lots of dark fibre cables in the country. The sale will raise needed cash required to make the deal a success and thereafter enable it launch Long Term Evolution (LTE) network with its 20MHz spectrum.
A fully binding sale and purchase agreement to purchase these assets is being finalised between Capcom and Suburban FiberCo. Suburban FiberCo is expected to satisfy its obligations under the sale and purchase agreement through a credit facility by Afreximbank and equity.
Multi-Links Limited was acquired by Helios Towers Nigeria (an infrastructure service provider that builds and rents towers to operators) in 2011 from Telkom of South Africa for $10 million following a trade partnership dispute which had to be resolved by a high court in Nigeria. Telkom SA acquired Multi-Links between 2007 and 2009 for $410 million.
It was learnt that the parent investors behind Helios Towers Nigeria, Helios Investment Partners (HIP) are the same people behind Capcom. Capcom consists of the following principal entities: Helios Investment Partners, an Africa-focused private investment firm which manages funds in excess of $1.7 billion which also owns Interswitch Limited, a leading e-payment and transaction switching company in Africa.
Other investors are MBC, a private trust with a focus on investing in emerging markets; Oldonyo Laro Estate, a private family office based in Kenya with over 40 years experience of investing in Africa across numerous industries as well as the Asset Management Corporation of Nigeria (AMCON) which took over MTS Wireless, an indebted mobile operator that is involved in the Starcomms transaction deal.
Chief Executive Officer of Multi-Links and CEO designate of the new Starcomms, Mr. Dem Elesho, confirmed to LEADERSHIP that Capcom would fund the transaction through a mixture of equity, debt and asset sales. As part of the transaction Capcom has raised $50 million of equity from a limited number of key investors which has been deposited into escrow account ahead of the annual general meeting (AGM) which held on December 28, 2012.
Capcom's turnaround strategy for Starcomms is based on a consolidation of the CDMA market and using the increased spectrum to shift its business model to the profitable data segment. The company has reduced outstanding financial debt from N31.9bn in Q1 2010 to N15.1bn as at Q3 2012. Starcomms has seen declining sales and earnings before interest taxation depreciation and amortization (Ebitda) since third quarter 2010.
It has been unable to pay major infrastructure suppliers and invest in the network has exasperated the decline in the operating performance. Company has stopped all debt service to conserve cash, effectively going into consensual lender default.