Kuwaitis snap up Celtel

By Paul Vecchiatto, ITWeb Cape Town correspondent

Cape Town, 30 Mar 2005

South African investors` hopes of exposure to the African mobile communications markets were dashed yesterday when a Kuwaiti firm, MTC, bought African cellular operator Celtel for $3.4 billion (R19.6 billion).

Celtel, which holds GSM licences in 13 African countries, was planning a dual London and Johannesburg listing later this year. However, MTC snapped up the African mobile communications group this weekend - a move that took one of its major investors, private equity fund Actis, by surprise.

"The offer was made just before the long weekend and the deal is done. We were surprised at the amount they offered and we do not believe that we would have received that amount from the listing," says Actis managing partner Peter Schmid.

Actis, formerly part of the Commonwealth Development Corporation, began investing in Celtel seven years ago and is Celtel`s largest shareholder after its chairman Mohamed Ibrahim, with 9.3% of the equity.

Old Mutual Asset Managers (OMAM) held 1% and African Bank also had a small shareholding.

"The sale makes sense from the shareholders` point of view," says Steve Minnnaar, a fund manager at OMAM. "If it is a loss to the JSE is hard to tell. The Kuwaitis came in with a great offer."

Schmid says Celtel has outperformed all expectations, growing revenue in excess of 115% per annum, establishing the company as the largest African mobile operator outside SA. It has grown to provide coverage for 30% of Africa`s population and has transformed telephony access for more than five million customers on a continent characterised by poor communications.

Celtel, formerly known as MSI Cellular Investments, initially saw an opportunity to develop a pan-African mobile network pending deregulation of the African telecoms sector. GSM has spread rapidly in sub-Saharan Africa and there are three times more mobile customers than fixed-line connections.

This year Celtel completed two rounds of fundraising totalling $270 million, to manage further expansion of its networks. The MTC money will be used to buy out existing shareholders.

Actis has invested over $600 million in the African private sector since 1998, of which $120 million is invested in African telecoms. It is an investor in Algeria`s Orascom, and Starcomms, Nigeria`s fixed wireless telecommunications operator, which is now managed by Paul Edwards, former head of MTN Nigeria.

Schmid says Actis has not seen too many opportunities to invest in South African telecoms but will keep its options open.

"The South African mobile market is quite a crowded space at the moment," he says.