Telkom is making aggressive moves into Africa with its Multi-Links, Africa Online and MWeb Africa acquisitions. It is also on the look-out for new prospects on the continent.
The organisation recently annouced the acquisition of M-Web Africa and 75% of M-Web Namibia for $63-million.
Although its operations are largely focused on corporate customers, M-Web Africa`s predominantly satellite-based internet access offerings allows the company to reach a wide range of customers, many of whom are not reached by traditional fixed-line infrastructures.
The M-Web Africa group is headquartered in Mauritius with operations in Namibia, Nigeria, Kenya, Tanzania, Uganda and Zimbabwe, an agency arrangement in Botswana and distributors in 26 sub-Saharan African countries.
The successful conclusion of the agreements being entered into is subject to conditions precedent, including regulatory approvals being obtained in certain African jurisdictions.
Telkom anticipates that it will extract significant synergies from the combination of M-Web Africa and Africa Online. These two companies can leverage the strength of Telkom's ISP services into Africa.
The Africa Online business, coupled with M-Web Africa, will strengthen Telkom's position as a pan-African information and communication technology service provider with the depth to provide retail and wholesale customers with the services they require.
In addition, Telkom owns 75% of Multi-Links, a private telecommunications operator with a Universal Access License in Nigeria allowing fixed, mobile, fixed-wireless, international and data services.
Multi-Links performed well in growing its subscriber base to 1,78-million as at 30 September 2008. For the twelve month period, Multi-Links added 1,51-million, of which 967 592 were connected since 31 March 2008.
As at 31 October 2008, Multi-Links' subscriber base had grown to 2,10-million. October also saw the launch of broadband EVDO (3G equivalent) data services in Lagos and Abuja which are expected to significantly enhance Multi-Links' revenue streams and service offerings, especially once these services are extended to other regions in the near future.
Multi-Links' service offerings currently include voice services on fixed and mobile handsets, closed user group and business centre services. Mobile Internet access is currently provided to about 70 000 narrowband subscribers and 240 broadband EVDO subscribers. Local and international leased lines are also being provided to corporate customers.
Multi-Links reported revenue of R813-million, a loss before tax of R289-million and a net loss for the period of R254-million. The deferred tax credit is largely due
to assessed losses.
Voice and data revenue contributed 72% of total revenue for the six month period, handset sales 20% and interconnect revenues 8%. Operating expenses of R1,081 million mainly consist of selling general and administrative expenses contributing 55%, which are largely attributable to handset subsidies.
Multi-Links invested approximately R1,73-million in capital expenditure during the six months and grew its access network to 589 transmission stations and its fibre deployment to 3 800km by 30 September 2008. The total capital expenditure for the full year is expected to be in the region of R4-billion.
Frost & Sullivan believes Telkom's move into the Nigerian market with Multi-Links will be a breath of fresh air for the organisation.
“The slowdown in the fixed voice segment will necessitate the expansion of business lines for Telkom,” says Frost & Sullivan ICT analyst Spiwe Chrieka. “The recent purchase of MWeb is another step in that direction, hot on the heels of the purchase of Africa Online last year. Data uptake in Africa is still minimal, but if Telkom invests in the relevant infrastructure in its data markets, the rewards will most definitely pay off.”
There are already positive signs in Nigeria, following the purchase of its 75% stake in Multi-Links. While the operator reported a net loss for the period, the significant growth in subscribers, shows the potential for revenue generation in this region. Multi-Links added nearly a million new subscribers in the six month period to September.
“Multi-Llinks is well positioned to become a major revenue generator for Telkom, as indicated by the high subscriber growth figures,” says Chireka. “With the fixed-mobile convergence strategy becoming a key focus area for Telkom, we can expect more investment and expansion in this operation.”
Many traditional fixed-line operators in Africa are pursuing expansion through Fixed Wireless Access technologies such as WiMAX, CDMA and W-CDMA. Telkom is likely to follow the same route for its future network expansion on the continent, as the advantages of deploying such technologies are on par with those of mobile technologies.
Africa Online increased its revenues to R63-million in the six months, with the major contributors being consumer wireless and broadband VSAT services.
Consumer wireless revenue growth was predominantly in Kenya and Uganda and the introduction of wireless in Tanzania, whilst growth in Pan African business revenues accounted for the increase in broadband VSAT.
Africa Online assumed responsibility for Telkom's African VSATs in January 2008, with the responsibility to perform service activation and assurance of various VSAT and point to point satellite links in neighbouring countries and on the rest of the African continent. Growing this business is expected to have future revenue generating capabilities for Africa Online.
The company reported a positive EBITDA margin of 1,6% and an operating loss of R8-million largely as a result of the interest paid on Telkom's shareholder funding.
Africa Online`s infrastructure roll out has not progressed as rapidly as expected due to longer than anticipated equipment lead times experienced in several countries of operation.