African Mergers and Acquisitions � Economic Colonialism?

with Nickey Mannya

The recent activities in the financial markets have sparked some conversations between the GEEK in me and myself. It has been reported that �While markets all over the world specifically in the United States, Europe and Asia were receiving their worst battering in years, Africa's economy, which has been relatively unharmed by the global financial crises, came in for some rare praise. Over the past five years sub-Saharan Africa experienced strong growth. At the same time, the World Economic Forum was debunking the notion that Africa was an instantly riskier investment than Europe or the United States. In its rating last week of banks by security of investment, South Africa, the African country worst-affected by the credit crisis so far, beat out Switzerland, Germany, Britain and the US for 15th place".

These came as good news since I always wished some sort of economic recognition could be afforded our mother continent. With a bias to ICT, I have always believed that given a chance, Africa could offer a lot to the world as it has been proven recently.

With that backdrop, some news caught my attention: �Vodafone is set to take control of Vodacom with a R22,5bn offer for a further 15 percent of SA�s biggest mobile phone operator. The bid, which has the approval of Telkom and the SA government, marks a big step forward in Vodafone�s strategy of seeking to boost growth through expansion in emerging markets.� said a statement from Vodafone.

This comes a few months after an approval from the Ghanaian Parliament on 14 August 2008 that Vodafone has completed the acquisition of a 70 percent stake in Ghana Telecommunications Company Limited (�Ghana Telecom�) for a total consideration of US$900 million (�483 million) on a debt-free, cash-free basis.

I have always thought that Africa could create opportunities for its people and offer the world fantastic investment opportunities. Once thing I never factored in my infant thoughts was, �mergers and acquisitions�. Now that Vodafone seems to be gulping all the African gems, I must say, this is a bit worrying. To me it feels like colonialism is back again. This time, it comes economically. We build the businesses with huge growth potential and investment returns, the west dangles some money in front and we sell. I wonder if the selling factored in future employment, gains, profit sharing and not exploitation and profiteering to Africa�s children. Otherwise, this could be futile.

Why the grudge about African born multinational, profitable organisations? The MTN Group announced a sound performance, with 74,1 million subscribers across its 21 operations as at 30 June 2008. This is a 53% increase in subscribers compared to the same period last year (June 2007:48, 3 million). This is against the background of increased investment in infrastructure and distribution to cater for ever increasing demand.

In the six months from 31 December 2007, the West and Central Africa (WECA) region increased its subscribers by 16%, to 32,5 million subscribers. The South and East Africa (SEA) region increased its subscribers by 9% to 21,0 million subscribers, followed by the Middle East and North Africa (MENA) region which recorded 47% increase to 20,6 million subscribers. The growth in the MENA region was mainly driven by MTN Irancell, which recorded a sterling increase of 93% to 11,6 million subscribers from 31 December 2007.

Lately, the Economic Times of India revealed JSE-listed MTN may be considering entering the Indian market under its own steam, after talks with the two Indian giants failed earlier this year. The company has been following an acquisitive strategy for some time, evident in its recent purchase of Cote d'Ivoire's second fixed-line operator Arobase Telecom, and Afnet, an Internet service provider.

However, Econometrix senior economist Tony Twine says MTN could do no wrong if it goes it alone in the Indian market. �Economic downturn or no downturn, anyone who plays in the Indian ICT market will have to do extremely badly to fail.� MTN last reported R27 billion cash on hand, of which it has dedicated R7 billion to developing its South African infrastructure. The company has said the local investment could save it between R1.2 billion and R1.5 billion � an amount that could go far in an Indian investment.

To Vodafone, the benefits of control for Vodacom are clear. It increases by almost one-third the rate at which several of the world�s fastest-growing mobile markets add to Vodafone�s subscriber base and revenues. And it enables Vodafone to keep pace with its rival, Orange/France Telecom, in the expansion of interests in the mobile markets of Africa, where Orange/FT�s emerging markets play is concentrated. This also positions it against the emerging markets specialist MTN, if it too is not taken over.

But the deal could also lead to increased competition for Vodafone in South Africa. Telkom SA�s current shareholder agreement limits its freedom to offer mobile services. That could change under the new shareholding dispensations, enabling Telkom to target, in particular, the rapidly expanding market for mobile data services, especially now with some money from Vodafone.

This shows that Africa is still an integral part of the global economics. My wish is for African organisations like the MTN Group, to sometimes become the hunter rather than the hunted.

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