MTN embarks on a different course
Category Property News
MTN is focusing its mergers and acquisitions strategy on expanding into new countries via standalone bolt-on acquisitions. This is in contrast to merging with other large telecom operators with a presence across a number of emerging markets.
That’s according to Khumo Shuenyane, MTN group chief strategy, mergers & acquisitions officer. He says that the potential for large “transformational” merger transactions in the global telecom industry has dried up mainly because of regulatory hurdles and the cost of telecom assets. “We will only be looking at large transactions where we believe we can successfully execute them,” he says.
“We will consider opportunities that arise”, but MTN is not actively looking for a mega merger opportunity, he notes.
MTN and India’s Bharti Airtel explored the possibility of a US23bn merger in 2009. Had this deal gone ahead, it would have created the world’s third-largest telecom operator, with revenues in excess of $20bn. The two companies had spent months in discussions before the merger was called off.
MTN is now focusing on smaller acquisitions that will allow it to push into new countries as a major player. It is targeting assets that hold a number one or two position in selected countries since it is a challenge to change an operator that is “number three, four or five” in the market into a viable business, he says.
MTN has evaluated a number of potential acquisitions in recent months, but has struggled to find an opportunity that meets its criteria, Shuenyane says. For MTN to consider buying an asset, it needs to be either a sizeable or active one in a market where there is plenty of scope for growth.
“We need opportunities that will move the needle,” he says. “Most of the opportunities we have considered have either been too expensive or not fitted the profile we are looking for.” The trend in the telecom market remains towards consolidation and MTN believes that there will be no more than two or three mobile operators in most countries within the next decade.
In addition to mobile operators within MTN’s target markets in Africa and the Middle East, the group may look at growing its Internet and data businesses through acquisitions. One such transaction resulted in MTN acquiring the African assets of US-owned Verizon in 2009.
MTN’s M&A division is also deeply involved in the group’s strategy to outsource its passive infrastructure to specialist tower companies. These deals allow MTN to move cellphone towers off its balance sheet and reduce capital expenditure. Such deals have already been concluded in Uganda and Ghana, with more on the table.
MTN is also continuously looking at a number of transactions with local equity partners in its subsidiaries across the region, bringing local shareholders on board or increasing its investment in its operations. Last year, MTN sold shares in its Zambian operation to allow for more local equity participation in the operation. It also increased its stake in its Nigerian and Rwandan businesses.
Author: Warehouse Finder
