Selling – just like that!
THE ANNOUNCEMENT last week by Naspers (parent company of Finweek) that it intended to dispose of its Internet Service Provider MWeb came as a shock to some in the market.
Naspers, which had backed MWeb through good times and bad, wasn’t expected to put the company up for sale.
CEO Rudi Jansen says it’s received a number of approaches over the past 12 months and it had come to realise MWeb was moving more in the direction of becoming a pure telecommunications provider, while Naspers had focused its operations on content provision.
Matthew Tagg, CEO of rival ISP WebAfrica, says in terms of the market, the time was right for MWeb to sell, as any buyer would be paying above the odds for subscribers in a consolidating market.
Gavin Joubert, portfolio manager at Coronation Fund Managers, estimates MWeb is worth around R3bn, although he speculates that the sale price might be lower at R2,5bn for 100% of the company.
He adds that Naspers owns 78% of MWeb, with the remainder held by black empowerment shareholders.
MWeb has more than 330 000 subscribers, evenly split between small businesses and home users, says Jansen.
Early speculation tagged Altech and Vox Telecom as likely suitors, but Jansen says initial interest had come from tele-coms operators rather than from rival ISPs.
Considering Telkom is in the midst of considerable internal turmoil and Neotel is still in the early phases of rolling out its consumer offerings, MWeb’s suitors are most likely mobile operators, more specifically MTN and Vodacom. Jansen rebuffs assertions that MWeb isn’t a profitable entity, commenting that because it’s included as a line item (Internet) in Naspers’s results as being unprofitable doesn’t mean it’s not in the black. "MWeb is extremely profitable," Jansen says.
He doesn’t think its sale will endanger MWeb’s attempt to acquire an individual electronic communications network licence, but rather that it will continue to operate as a stand-alone business unit.
"The way I see it, we’ve built up the company and the brand and it makes no sense to dismantle it."
MWeb is also applying for radio frequency spectrum to run a wireless broadband network using WiMax technology.
Jansen adds that he doubts a change in ownership would affect that process. "We’ve built a strong cross-border presence, with representation in 36 countries and five African subsidiaries. As such we have a lot to offer in helping any prospective buyer build an integrated African data offering."
The one part unlikely to move with MWeb to its new owners is MWeb Commercezone, which does the majority of its work inside the Naspers group and, as such, it would make more sense for it to remain part of Naspers.
With reports emerging last week that MTN had paid R1,4bn for Verizon Business operations in SA, it would appear consolidation in the local Internet industry is continuing apace, with the telecoms operators leading the charge.
Finweek
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