SA's second-largest cellular operator, MTN, wants to expand its footprint in the Middle East and Africa, but does not see much chance of buying a large company.
MTN, which launched in 1994, operates in 21 countries in Africa, Asia and the Middle East, and has 164.5 million subscribers. Six months ago, the company said it was looking for a large deal that would move the “needle”.
However, yesterday the group said a “transformational” deal that will expand its subscriber base by 50% is unlikely. Instead, it is looking for bolt-on acquisitions in its comfort zone: Africa and the Middle East.
CEO and president Sifiso Dabengwa says a “transformational” deal is not a priority for the group. He says the company is focusing on bolt-on deals that would expand its footprint and enable it to be a number one or two player in a country.
Dabengwa explains that a transformational deal is one that would impact significantly on revenue and subscribers, and is likely to bolster both by 50%. He says it is difficult to find the types of buyout opportunities that would give it access to new countries that it is interested in.
MTN operates in Afghanistan, Benin, Botswana, Cameroon, Cote d'Ivoire, Cyprus, Ghana, Guinea Bissau, Guinea Republic, Iran, Liberia, Nigeria, the Republic of Congo, Rwanda, South Africa, Sudan, Swaziland, Syria, Uganda, Yemen and Zambia.
Safe hunting ground
MTN is “comfortable” operating in the Middle East and Africa, as the company understands those regions well enough to minimise risk, notes Dabengwa. However, he says a deal with Zain, for example, would not be likely as it operates in countries that MTN does not want to enter.
Bharti Airtel, once MTN's suitor, bought Kuwait-based Zain in 2010, giving it access to 42 million subscribers in 15 African countries.
Dabengwa says the company would look at Ethiopia if there was another licence offered. MTN would also consider Angola if there was a third licence or a privatisation.
MTN will not look at the pacific region or South America, says Dabengwa. He says MTN might consider moving into South East Asia, but needs to feel comfortable the asset is worth investing in.
MTN has the capacity to spend and what its balance sheet can carry would be its limit, says Dabengwa. The company ended the year to December with net cash of R11.8 billion.
The operator is continuously looking at opportunities and has a dedicated merger and acquisition team, but it is about the question of finding a seller, says Dabengwa.
MTN is also looking at India after its failed bid to merge with Bharti Airtel, but the regulatory environment makes entering the country a “bit of a challenge,” he comments.
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