[kictanet] BARBARIANS at the GATES of KENYA: ATC’s moves to consolidate Wins from Africa Online Deal by Investing KSh 2 billion in Wananchi Online and sends signal that Private Equity Industry has its eyes firmly set on Kenya”

[alice]

*BARBARIANS at the GATES of KENYA*

 

*“ATC’s moves to consolidate Wins from Africa Online Deal by Investing 
KSh 2 billion in Wananchi Online and sends signal that Private Equity 
Industry has its eyes firmly set on Kenya”*

 

Like the famous KKR acquisition of RJR Nabisco that put the Private 
Equity industry center stage in America in the 80’s, industry sources 
are seeing the Africa Telecom Company Ltd’s (ATC) KSh 2 billion 
investment plans for Wananchi Online as a signal that the Private Equity 
Industry in Kenya is set to explode.

 

ATC shot to prominence last year when they purchased 30% of Africa 
Lakes/Africa Online at Stg 10 per share and then got into a bitter and 
hostile takeover battle with Telekom South Africa.  They successfully 
extracted a heavy price from Telkom South Africa by eventually selling 
their shares for Stg 25 per share plus another US$ 1.5m of costs.  
Telkom South Africa’s share price fell significantly at the news and 
their CEO has subsequently been forced to resign.

 

The deal was a classic private equity play.  Africa Online’s revenues 
have been shrinking for 5 years at a time when the Internet industry in 
Africa as a whole was growing at record speeds.  The cause was typical 
of many public companies in the UK: bloated head office costs, overpaid 
and inept senior executive management and a board that could not deliver 
change.  Richard Bell a seasoned ICT entrepreneur turned Private Equity 
Manager saw the latent value in the business and realized that the only 
way to release the value was through change – with or without the 
permission of the board.

 

Leveraging of this experience Bell/East Africa Capital Partners teamed 
up with Mark Schneider a US Media Entrepreneur and brought in local 
support through James Gachui (Chairman of Transcentury) & Jimnah Mbaru 
(Chairman of Dyer & Blair) both well known local financial investors, to 
use ATC to invest in Wananchi Online and create Wananchi Telecom.

 

It therefore came as no surprise to the Industry when Wananchi Online 
announced to its shareholders this week that there would be an EGM on 
Friday 20^th April at which shareholders would be asked to approve a 
capital investment and infrastructure rollout costing KSh 7 billion over 
5 years with the first two years accounting for nearly KSh 2 billion of 
capital.

 

Commenting on the investment Richard Bell said that the funds would be 
used to rollout a country-wide broadband Wi-Max network delivering 
Internet and Fixed Line Voice services “…Wananchi Online’s roots were in 
making the Internet affordable to Kenyas now *Wananchi Telecom* will do 
the same by delivering the most inexpensive and affordable consumer 
broadband service in Africa – and that will be GUARANTEED.  It’s a very 
exciting time in this industry and we believe that Kenyans are crying 
out for a true broadband service in their homes and our Wi-Max product 
will deliver this……”.

 

The network will be ready in greater Nairobi by the middle of the year 
and in all major towns by the end of the year.  Joseph Mucheru another 
local ICT guru and Deputy CEO of the new group went on to commend the 
Government for their efforts in developing the ICT sector and committed 
that Wananchi Telecom would support all of these initiatives including 
the governments plans for Schools, Universities and ICT Villages  “…by 
the time TEAMS, SEACOM and EASSY maritime cables get to Mombassa our 
network will be ready and all Kenyans will have broadband available.  We 
Kenyans (and some operators) tend to spend a lot of time complaining 
about the government without recognizing the government’s achievements.  
The Hon Mutahi Kagwe and PS Ndemo have in my view set the seeds of a 
great future for Kenyans in ICT……..”

 

The sheer scale and audacity of their plans (3 times larger than Access 
Kenya’s IPO, with 5 times more base stations) for Wananchi Telecom have 
taken even industry insiders by surprise, but that’s typical of Private 
Equity.  Whether you like them or hate them the one certainty is that 
the power, speed and agility *these Private Equity Barbarians *is going 
to be a big force in Kenya over the next 5 years.