[kictanet] South Africa's Telkom snaps up Kenyan Internet service provider

[McTim]

South Africa's Telkom snaps up Kenyan Internet service provider
Sep 29, 2009

The local Internet scene could be headed for major realignments as South
Africa's largest fixed-line phone operator, Telkom, silently sneaks into a
territory it has long been yearning for.

A complex web of share-purchase transactions among telecom operators in
Africa's richest nation, has ended up with the acquisition of a local
satellite data transmission services company, Afsat Communications Limited.

After failing to secure a 51 per cent stake in Telkom Kenya late 2007,
Telkom SA Ltd opted to court an Internet Service Provider, MWEB Africa, a
subsidiary of South African media and communications conglomerate Naspers
for a take-over bid.

Interestingly, the deal was successfully concluded in April this year, with
the firm paying a massive 63m US dollars (4.7bn shillings) for 100 per cent
and 75 per cent shareholding in MWEB and MWEB Namibia respectively.

The value of the transaction, which ostensibly excluded the South Africa's
MWEB unit, has since been kept underwraps.

Incidentally, MWEB, the Internet solutions arm of Naspers - the company that
also owns Multichoice Africa and popular magazine arm Media 24 - had bought
Afsat Communications, including its subsidiaries in Kenya, Uganda, Tanzania,
Nigeria and Zambia in October 2007.

This implies the local Internet firm, Afsat Communications, is now part and
parcel of Telkom South Africa.

"AFSAT is now fully part of Telkom South Africa," Mr Job Ndege, General
Manager, Afsat Services Ltd told The Financial Journal Last week.

"This is an implied acquisition," he said. So far, South African Telkom owns
Nigeria's Multi-Links and Kenya's Africa Online, with plans to aggressively
fund both units.

The latest acquisition is part of the company's strategy aimed at reducing
dependence on domestic revenues, while expanding further into Africa to
offset dwindling profits at home.

It is widely argued that the acquisition, together with the company's
investment in Africa Online will increase the value proposition of its
product and service offerings to all customer segments in Sub-Saharan
Africa.

The acquisition gives Telkom South Africa a foothold in 28 African
countries, making it the biggest satellite-based ISP on the African
continent.

"We think our value preposition is so powerful that the current terrestrial
services cannot match," says Ndege.

He says the value prepositions of the company's products and services
include reliability, consistency, speed, availability, cost effectiveness
and strong support.

Afsat Communications offers direct satellite access services to its clients
by utilizing all communications requirements such as backbone access,
backhole access and last mile access.

In Kenya, Afsat is known for its satellite Internet connectivity solutions
to residential and business customers.

It also supplies corporate and state owned customers with reliable and
secure corporate data network solutions. This service is provided through
VSAT connectivity using the popular iWay brand, which has its regional
headquarters in Nairobi.

"The response in the market for our products has been very good. We have had
an unprecedented growth," says Ndege.

Amongst the company's main competitors and who are hoping to utilise the
fibre optic cables to provide international Internet connectivity include
Access Kenya Ltd, Kenya Data Network and UUNET Kenya.

"The fibre optic will provide much capacity. The demand for capacity is
growing, but there have not been enough satellite capacity to provide
international connectivity," says Ndege.

Kenya's average Internet usage grew by 230 per cent to 700MB last year from
the previous years 304 MB. The fibre optic networks are expected to
supplement satellite in boosting the capacity, since satellite bandwidth
demand in Africa far outstrips the supply from the highly consolidated
satellite fleet operator industry.

Indeed, Afsat Communications has announced a five-year (2010-2014) strategic
pan aimed at improving and expanding its infrastructure within East Africa,
with a view of ensuring steady and reliable supply of its products and
services. The next phase of the company's growth will involve setting up
additional hub infrastructure to cover the region of the Sub-Saharan Africa
between 2011 and 2015. Already, the company has built five satellite hubs in
Africa.

Afsat serves Kenya through a distributor network of ISP's such as Callkey
Networks and Virtualsat, by providing last mile connectivity to remote
locations such as Lokichoggio, Mandera, Lamu, Homa Bay, Garissa, Dadaab,
Wajir and Namanga.

The company also has a large number of VSATs in Nairobi.

There are over 485 iWay VSAT terminals in Kenya. iWay services are available
in 28 countries in Africa, and its partnership network consists of 32
distributors, with four subsidiaries in East Africa and Nigeria. Afsat
Communications was formed in 1992 to offer communication solutions to
corporates in East Africa.

In 2001, the company changed its focus with the re-launch of iWay Brand
targeting the whole Sub-Saharan Africa.

Telkom SA Limited aims to become a Pan-African integrated service provider
that offers international communications and Internet connectivity, hosting
and managed data services, as well as wireless voice and mobile broadband
solutions.

Over the long term, it plan to provide international data connectivity to
major cities in Africa through regional hubs. It also seek to position
Telkom as a wholesale facilities and infrastructure enabler for regional
incumbents.

With regards to existing subsidiaries, Telkom SA is focusing on achieving
strong growth through both organic and acquisitive business development
strategies, as well as by leveraging synergies across the Group.

For Africa Online, this includes leveraging its available international
capacity to deploy satellite based Internet access, and using Africa Online
as the main vehicle in which Telkom will deliver Internet services outside
of South Africa.

Source: The Standard website, Nairobi, in English 29 Sep 09

-- 
Cheers,

McTim
"A name indicates what we seek. An address indicates where it is. A route
indicates how we get there."  Jon Postel
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