Actis to buy a controlling stake in Octotel at an enterprise value of R2.3 billion

Somethin insane to think about:
Telkom has a market cap of R13 billion and they are probably the largest infrastructure player in South Africa.

At least 50% of Octotel was valued at R2.3 billion. So an upper bound value for Octotel is R4.6bn, which is about 35% of Telkom's market cap value.
Yet....
Octotel has lets say between 175 000 and 180 00 customers, most of which are in the WC. Yet Telkom has fibre, ADSL and mobile under its belt, and is in every city and town in the country.

If you wanted hard numerical evidence that Telkom is a garbage company that is chronically mismanaged, this is it.
 
konfab said:
Somethin insane to think about:
Telkom has a market cap of R13 billion and they are probably the largest infrastructure player in South Africa.

At least 50% of Octotel was valued at R2.3 billion. So an upper bound value for Octotel is R4.6bn, which is about 35% of Telkom's market cap value.
Yet....
Octotel has lets say between 175 000 and 180 00 customers, most of which are in the WC. Yet Telkom has fibre, ADSL and mobile under its belt, and is in every city and town in the country.
Click to expand...
It is interesting indeed. However, Octotel passes 175,000 homes. One can assume a penetration rate which is much lower. Rough estimates would put their number of subscribers at less than 50,000.

All the valuations look really high - Vumatel and DFA (CIVH) at R18.5 billion, Rain at R15 billion and Octotel at R2.3 billion or higher.

It is clear that companies are willing to pay a premium for telecoms infrastructure, which is interesting as these companies were seen as dumb pipes just a few years ago.
 
I wonder how this affects me as Octotel are trenching right outside my home now :/
 
mathebus said:
I wonder how this affects me as Octotel are trenching right outside my home now :/
Click to expand...
Presumably business should continue? Controlling stakes are seldom bought unless the buyer expects profits, especially not for such large sums.
 
If they are decently profitable, then PE firms love businesses that are boring and 'dumb'. You can then do a simple deleveraging play and 2x-3x your money over 5 years.
 
konfab said:
Somethin insane to think about:
Telkom has a market cap of R13 billion and they are probably the largest infrastructure player in South Africa.

At least 50% of Octotel was valued at R2.3 billion. So an upper bound value for Octotel is R4.6bn, which is about 35% of Telkom's market cap value.
Yet....
Octotel has lets say between 175 000 and 180 00 customers, most of which are in the WC. Yet Telkom has fibre, ADSL and mobile under its belt, and is in every city and town in the country.

If you wanted hard numerical evidence that Telkom is a garbage company that is chronically mismanaged, this is it.
Click to expand...
Another way of looking at it is how overvalued these companies are. A side effect of the state of our internet. When you have effectively monopolised the industry you can effectively value it at whatever you want because you can charge whatever you want.
 
rpm said:
It is interesting indeed. However, Octotel passes 175,000 homes. One can assume a penetration rate which is much lower. Rough estimates would put their number of subscribers at less than 50,000.

All the valuations look really high - Vumatel and DFA (CIVH) at R18.5 billion, Rain at R15 billion and Octotel at R2.3 billion or higher.

It is clear that companies are willing to pay a premium for telecoms infrastructure, which is interesting as these companies were seen as dumb pipes just a few years ago.
Click to expand...
That just makes it even worse for the likes of Telkom
 
Swa said:
Another way of looking at it is how overvalued these companies are. A side effect of the state of our internet. When you have effectively monopolised the industry you can effectively value it at whatever you want because you can charge whatever you want.
Click to expand...
They are not monopolies and cannot simply charge whatever they want.

If a fibre infrastructure provider decides to invest in an area, they need to make sure that the investment is payed back over a long term because of the high cost. If they go and hike the prices to a really high amount, another fibre provider will see this and know that they can trench the area and win over all those customers. The initial fibre provider will then have made recouping that initial investment over twice as difficult as now they have to share the same customers and charge a low enough amount to get the customers back.
 
konfab said:
They are not monopolies and cannot simply charge whatever they want.

If a fibre infrastructure provider decides to invest in an area, they need to make sure that the investment is payed back over a long term because of the high cost. If they go and hike the prices to a really high amount, another fibre provider will see this and know that they can trench the area and win over all those customers. The initial fibre provider will then have made recouping that initial investment over twice as difficult as now they have to share the same customers and charge a low enough amount to get the customers back.
Click to expand...
They are essentially monopolies as most areas have only one provider.
 
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