MTN could own 5% of SNO

Johannesburg, 06 Nov 2002

Cellphone group MTN could end up owning 5.1% of the second national operator (SNO), despite deciding not to bid for control of the new player.

MTN was once thought a likely bidder for the 51% stake in the SNO still being contested, but decided not to do so mainly because of heavy financial commitments to its relatively new operation in Nigeria. However, an agreement with the largely British Goldleaf consortium, which last week submitted its own bid, could see it recoup money spent on initial investigation and research. It will not have to lay out further capital for the shares.

Goldleaf and MTN today confirmed the existence of an agreement giving MTN the option to acquire 10% of the bidding consortium, at no cost. The shares are currently held by the Premier Contracts Group (PCA), which also holds consortium shares which are to be transferred to UK-listed African Lakes Corporation.

MTN has a 12-month period after the commercial launch of the SNO in which to exercise the option.

"It is in mutual recognition by both parties of the value-add that MTN can bring and the potential value of opportunity the SNO holds," says Yvonne Muthien, MTN group executive for corporate affairs. She adds that MTN would have to review the position of the SNO and the MTN balance sheet before exercising the option, and would likely only do so towards the end of the window period.

The MTN board announced its decision not to bid for SNO control in early September, citing funding requirements, among other factors. However, the company said its board did "favour the possibility of working with the SNO by providing access to the group`s wireless network and other resources".

Goldleaf`s PCA and New York-based Telecom Africa International Corporation, which owns 30% of the consortium, are understood to have worked closely with MTN on a bid before the decision. The consortium says it also has a memorandum of understanding with the cellular player which covers infrastructure sharing.

MTN says it has given Goldleaf access to intellectual property that will help it in "determining the most viable business plan and market entry strategy for the SNO" and will give "technical support and other support from MTN on a commercial, non-exclusive basis".

If the Goldleaf bid is successful and the MTN option exercised, the final shareholding of the SNO will see Transtel and Esi-Tel with the biggest stake, a joint 30%, followed by black empowerment consortium Nexus Connexion at 19%. Africa Telecom International Corporation, Gateway Communications and the Premier Contracts Agency will all own less than 10% of the final company.

However, only 58% of the authorised Goldleaf shares have been issued, leaving more than 20% of the SNO still up for grabs. So other parties could still be included in the consortium..

The Optis consortium, the second bidder for the 51% stake, has not yet released details of its makeup, but is understood to be majority owned by the South African Friedland family.

The bids and business plans submitted by Goldleaf and Optis will be opened to public inspection on Monday.

[In an earlier version ITWeb reported that MTN could own 3.8% of the SNO. That figure was based on the issued, and not the authorised, share capital of Goldleaf.]