Altech partnership creates largest fibre network in Africa

The Altech Group (Altech) has concluded the realignment of its East African network interests by injecting them into a strategic partnership with Liquid Telecommunications Holdings (Liquid), a highly successful telecommunications group operating in southern Africa.

This partnership will enable Altech to put to an end the losses being incurred in East Africa and will result in Altech acquiring a strategic minority interest in Liquid.  In turn, it will significantly expand Liquid's networking footprint and create the largest single fibre network in Africa, spanning Kenya, Uganda, Rwanda, Zambia, Zimbabwe, Botswana, DRC, Lesotho and South Africa.

The efficiencies this will create will be considerable and will enable the interconnectivity of the continent in a manner previously unachievable. Enterprises will, in many cases for the first time, be able to obtain point-to-point connectivity between a virtually unprecedented number of African countries. This network will provide reliable, high-speed, cost-effective connectivity to carriers, mobile operators, ISP's, homes, financial institutions and businesses of all sizes.

Altech Group CEO, Craig Venter believes that the realignment has substantial benefits for Altech. "As shareholders are aware, our East African activities have, in recent years been problematic and unprofitable, and we have previously expressed our intention to deal effectively with these challenges.  The Liquid transaction opens up a positive new chapter for Altech, in partnership with a group with proven expertise in its sector."

"During the past two years we have sustained substantial losses and impairments on our East African assets. However, as a consequence of this transaction these losses will now discontinue and we can anticipate attractive returns on our investment in Liquid, says Mr Venter."

He added - "Altech has already announced an agreement for the disposal of its loss-making Altech West Africa operation and the combination of these two transactions should put Altech firmly back in its more normal growth patterns of the past."

"A significant benefit to Altech is that we will be able to refocus more intensely on our core competencies and return the group to its positive growth model as reflected in our traditional activities, which are all substantially profitable. The benefit is demonstrated by a positive impact on pro-forma headline earnings." adds Mr Venter.  
This partnership makes for a strong strategic fit – Altech acquires an interest in a highly successful and profitable African data network operator and extends Liquid's network from southern and central Africa to East Africa as well – in the process helping to create a Pan-African operator, which will have a unique and unrivalled coverage, particularly as regards multi-national companies requiring a presence in Africa and support for their branch communication services.

Liquid CEO Nic Rudnick says "Altech's East African operations have built the largest fibre network in the region which has huge potential. I strongly believe that its people, its network and its customers will all add value and opportunity to our current operations. Liquid has been building and investing in a high-quality pan-African fibre network for many years and this deal will accelerate our progress by enlarging our network footprint and complementing our existing product portfolio. We are a strong and ambitious company and have a long-term investment plan for the region."

Mr Rudnick concludes: "The compatibility and complementary nature of Liquid and Altech are important features of this strategic alliance – notably with regard to the use of Altech's multimedia technologies and products, as we extend our value chain to the retail data markets in Africa".

Certain of Altech's activities in the Multimedia sector will benefit from the enlarged Liquid group as it extends its reach into this wider mass communication market, involving converged internet, VOIP, IPTV and video-on-demand services in high growth African markets.

Altech will contribute its majority interests in Altech East Africa on a net debt-free and cash-free basis, as well as subscribe and pay US$16.5m for new shares in Liquid, to give it an initial 8.6% equity stake in the company, with shareholder voting rights of 10%, and the potential to further increase the shareholding in Liquid in the future. Altech will also, for as long as it holds at least 5% of the issued share capital of Liquid, be entitled to one director on the board of Liquid.

In the event of a listing by the Liquid group on a stock exchange, provision is made for an exchange of Altech's interest in Liquid, for shares in the listing entity, based on the greater of an independently-determined fair market value or, in the first year after the conclusion of the transaction with Altech, US$50 million (i.e. approximately R450 million).

The transaction also provides Altech with a put option, should it wish to put its shares in Liquid to its controlling shareholder, at an independent merchant bank valuation.

The transaction is subject to customary conditions, including board and regulatory approvals.