[Kictanet] ITWeb comment on AfricaOnline deal

[Brian Longwe]

All of a sudden it seems everyone wants a piece of AfricaOnline -  
this telco gets some criticism about their ambitions....

.....although the Uganda Telecom deal provokes some interest - would  
Telkom SA really add value?

Regards,

Brian
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Telkom mum on Africa move




By Damaria Senne and Nicola Mawson

Posted: 22 January 2007

Telkom has refused to say whether it has bid for Kenya-based pan- 
African Internet company Africa Online, owned by African Lakes  
Corporation (ALC), a London-based group.

“The reports linking Telkom SA as a bidder for Africa Online are  
speculative and Telkom will not comment on media speculation,” says  
the fixed-line operator.
Media reports indicate that, two weeks ago, Kenyan-based group Africa  
Telecoms announced plans to offer £15.50 a share in cash for all  
African Lakes' shares, valuing the ordinary shares held by Africa  
Online's parent at £4.2 million, Balancing Act reports.
However, soon after the cash offer was reportedly made, ALC confirmed  
that it was in discussion with interested parties for the sale of the  
ALC group or of Africa Online separately.
Other media reports indicate Telkom is one of the interested parties  
bidding for the shareholding of Africa Online.
Strange move

An analyst, who asked that his name be withheld, says a move by  
Telkom to bid for an Internet service provider (ISP) would be “strange”.

He says he cannot understand why the fixed-line operator would buy  
into an ISP rather than other, more lucrative, operations such as  
mobile or fixed-line communications.

“If Telkom does move into Africa, adding IT to a telecoms portfolio  
would be the way to go, but, I'm not sure that it would add any  
significant value to their business,” he says.

Instead, the analyst argues, the addition of an ISP may subtract  
value from Telkom because of low penetration rates and a lack of  
sophisticated technology on the continent.

“Telkom has far more serious issues to sort out at this stage,” he  
says, referring to impending competition as Neotel enters the market  
and Telkom's bid for Business Connexion comes before the Competition  
Tribunal.

Back door entry

BMI-TechKnowledge senior analyst Tertia Smit says buying into an ISP  
would be another way for Telkom to enter the African market, with the  
idea of establishing a presence in African countries where Africa  
Online has operations, before making a bid for larger players like  
fixed-line and mobile operators.

The ISP has operations in Cote D'Ivoire, Ghana, Kenya, Namibia,  
Swaziland, Tanzania, Uganda and Zimbabwe.

Telkom, however, would not discuss whether it has put such a strategy  
in place. The group, which has previously expressed its intention to  
explore investment opportunities internationally, has unsuccessfully  
bid on a number of telecoms companies, including Nitel in Nigeria.

CEO Papi Molotsane also previously said the fixed-line operator plans  
to explore joint opportunities in Africa with Vodacom, of which  
Telkom holds 50%.

Last year, Telkom confirmed its interest in buying into Ugandan Telecom.