African Capital Markets News

Private equity $25 mln for East African media and telecoms

Emerging Capital Partners (ECP) announced on 22 September it has committed $25 million to Wananchi Group Holdings (www.wananchi.com/), a leading East African media and telecommunications company specializing in pay television and high-speed Internet services in Kenya and Tanzania.  ECP is an international private equity firm focused on investing across Africa and this is its 10th investment in African telecoms. It still has stakes in Zain Gabon, MTN Cote d’Ivoire and Cellcom (GSM operator in Liberia and Guinea).

The equity investment will help upgrade and expand Wananchi’s existing network infrastructure to provide East Africa’s first triple-play service, consisting of digital pay television, high-speed Internet and Voice-Over-IP services.

ECP’s CEO Tom Gibian says, according to the website (www.ecpinvestments.com) “ECP has been active in the African telecom sector for nearly a decade. Following on the tremendous growth in African mobile penetration over the last 10 years, we view broadband and related services as the next “game changer” in African telecom.  Wananchi’s product offering, network infrastructure and strong management are ideally suited to address the significant unmet demand for media and broadband services in East Africa.” So called “triple play” has been a major driver for growth of telecom companies in developed and emerging markets for the past decade.

Wananchi presently serves the retail and corporate markets in Kenya and Tanzania through its consumer and corporate divisions.  The consumer division operates under the Zuku brand and provides cable television and broadband Internet services to residential customers in Kenya using a combination of hybrid-fiber-coaxial and WiMax technologies. The corporate division operates under the SimbaNET brand and is a leading provider of Internet and virtual private network services to corporations, local governments and non-governmental organizations in Kenya and Tanzania using a combination of metro-fiber, WiMax and VSAT technologies.

Cost and infrastructure used to limit East Africa’s pay television and Internet services and penetration rates of cable television and broadband Internet throughout Kenya and Tanzania are less than 1% each. South Africa’s penetration rates for pay television and broadband Internet are approximately 15% and 4% and Mexico’s 24% and 20%. East Africa’s demand is growing, spurred by strong GDP growth, the emerging middle class, and new undersea fibre cables that make services more accessible and affordable.

Regional venture capital fund manager East Africa Capital Partners (www.eacp.co.ke) formed Wananchi Group in 2007 through acquiring several smaller companies.  EACP chairman, Mark Schneider, is a leading cable entrepreneur and co-founder of United Global Communications which was acquired by Liberty Media in 2004 and grew to become one of the largest cable companies in the world with operations in over 20 countries in Europe, Latin America and Asia.

Bryce Fort, ECP managing director, says the firm “is looking forward to working with EACP and Wananchi, two of East Africa’s world-class institutions.”

$8 bn for African ICT

Some US$8 billion was invested in developing Information and Communications Technology (ICT) in Africa in 2008. According to Nigeria’s Daily Independent newspaper (www.independentngonline.com) the Secretary-General of International Telecommunications Union (ITU), Hamadoun Toure, announced this at a recent African Telecom Development Summit 2009, held in Abuja, Nigeria, praising the advances of the last 10 years.

The report quotes Toure: ”It has been an extraordinary decade for Africa and it gives me great personal pleasure to see how the continent has taken huge steps forward in bringing connectivity to African people. Just ten years ago, virtually nobody in Africa had a mobile phone; today across the continent mobile cellular subscription teledensity has reached 32.6%, with some 250 million subscriptions in Sub-Saharan Africa” – creating enormous progress in Internet access.

Nigeria is the largest market, with over a quarter of all subscriptions. Toure says more than 30 mln Africans now have access to the Internet. Between 2000 and 2008, Nigeria alone has added 11 mln new Internet users, 40% of the new users in Africa. But Africa still lags in broadband access, with only 635,000 fixed broadband subscribers.

Toure is the first African elected as the Secretary-General of ITU, umbrella body of more than 700 telecommunications organizations. He called for developments in policy and regulatory frameworks and political will by African Governments to promote ICT roll-out.

Kengen issues $197 mln bond for 500 MW more electricity

The Kenya Electricity Generating Company (KenGen) has received regulatory approval from the Capital Markets Authority for a corporate bond with a nominal value (face value) of KSh15 billion (US $196.8 mln). The offer is open from 8-29 September. The bond aims to raise capital for an additional 500 MW of generating capacity

According to a report on Reuters on 31 August, the bond would yield 12.5% net interest for investors. Kenya is one of several East African countries where fast economic growth has led to power shortages. Kengen produces about 80% of the electricity output, mostly in hydropower stations, and wants to expand geothermal generation by about 500 MW by 2012.

KenGen’s Managing Director, Eddy Njoroge, reportedly told an investor briefing that, if the bond was oversubscribed, the company had the option to take up an additional KSh 10 bln, although they have not yet decided whether to opt for this. “We have the projects even if we get 25 billion shillings,” he said.

The term of the bond is 10 years. Interest will be paid in the first two years and the principal sum would be redeemed every 6 months for 8 years in equal installments. The minimum investment would be KSh100,000 (approx $1,300) and extra investments would be in multiples of KSh100,000.

Standard Chartered Bank is reported to be lead arranger, KPMG the financial adviser and Standard Investment Bank the lead sponsoring broker. Retail investors are expected to take 20%, local and foreign institutional investors the rest.