Telkom Rules Out Nigerian Acquisitions as Next Step

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Telkom Rules Out Nigerian Acquisitions as Next Step

Post  nex on Wed Jul 28, 2010 5:11 pm

Telkom South Africa Ltd., Africa’s largest fixed-line phone company, has ruled out acquiring other operators in Nigeria as a solution for the losses made with its Multi-Links business in that country.

“Anything that we will do to bulk up would not be through acquisitions,” Acting Chief Executive Officer Jeffrey Hedberg said in an interview in Johannesburg today. Deals in the rest of Africa are not planned either.

Former CEO Reuben September, who left on July 7 after the company did not renew his contract, said in November Telkom would try to buy other mobile voice and data companies using the code division multiple access technology in Nigeria to gain scale in Africa’s most populous nation.

With size comes the ability to maintain better margins, September said. In January, Telkom’s board rejected September’s proposal to merge Multi-Links with with Starcomms Plc, a Nigerian CDMA operator, Chairman Jeff Molobela said in a briefing in Johannesburg today.

The merger would have given Telkom a 39 percent stake in the new company and wouldn’t have increased Telkom’s share of the market much from its 2.6 percent, Molobela said. Telkom paid $410 million for Multi-Links. The unit reported a loss of 659 million rand ($89.5 million) before interest, taxes, depreciation and amortization in the 12 months through March.

“The company would not have been able to do anything; the partner had about $130 million in debt,” Molobela said in an interview. The proposal was “irresponsible” and “far from reducing our exposure to Nigeria, it would have increased it.”

Cell C Prospects

In South Africa, Telkom will focus on the start of its mobile service, which is still planned for this calendar year, Hedberg said. The company has lost executives responsible for international operations, finance, strategy, procurement and network provisioning in the past five months.

Hedberg, formerly the CEO of Cell C Ltd., South Africa’s third-largest mobile-phone operator, said today a tie-up between Telkom and Cell C “could make sense.” He also expressed this view while still at Cell C. There are no discussions about a possible tie-up and Telkom will focus on services to retain customers, Hedberg said today.

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