Telkom wins entry to Nigeria with Multi-links acquisition

Telkom, the fixed-line operator, has finally won entry into Nigeria with the acquisition of a 75 percent stake in the country’s private telephone operator, Multi-links, for $280 million (R2.1 billion).

Multi-Links is the second-largest private telephone operator in Nigeria, with 162 000 subscribers. It trails StarComms, which has 400 000 customers. Nigeria has 1.5 million fixed-line subscribers and the country has a population of 135.6 million.

Telkom’s chief executive, Papi Molotsane, said the acquisition gave Telkom a springboard for further expansion into other west African countries. "The size and nature of growth of the Nigerian telecoms market, its low tele-density of… 20 percent and its pent-up demand for internet access demonstrates that there is immense potential for future growth, making this an ideal acquisition."

Cadiz African Harvest portfolio manager Rajay Ambekar said: "It is a great acquisition and the price they paid seems not to be over the top … and provides Telkom with good growth opportunities."

Multi-links had all the key technologies that Telkom could build on, he added. "What would be interesting to see, on the mobile side, is how Vodacom would get involved. There is lots of potential."

Telkom owns 50 percent of cellular operator Vodacom.

Last year Multi-links was awarded a unified licence, which enables it to offer a diverse range of services.

Dobek Pater, an analyst at Africa Analysis, said that a unified licence gave room for growth for wireless fixed voice services, because cellular operators in Nigeria were charging premium rates. "Nigeria [has] a growing voice market."

Molotsane said Telkom would immediately gain control of Multi-links’ board and operations, to "enable us to manage our investment more effectively and efficiently".

The Multi-links transaction comes a few weeks after Telkom’s $20.27 million acquisition of internet service provider Africa Online.

Africa Online has operations in Kenya, Tanzania, Uganda, Ghana, Ivory Coast, Namibia, Swaziland, Zimbabwe and Zambia.

Telkom’s expansion outside South Africa is shaping up but it is yet to acquire a national fixed-line operator with a bigger footprint. Telkom wants to diversify its offerings to offset local sagging revenues and has identified Nigeria as one of the target markets.

Pater said appropriate opportunities were becoming scarce, and if Telkom had opted to wait until a fixed-line operator with a bigger footprint than Multi-links became available, chances were that it would be a highly contested company. "There is no guarantee that good opportunities will come up."

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Telkom wins entry to Nigeria with Multi-links acquisition