Spending at last
Hot on the heels of the group’s impending R250m-plus acquisition of a 51% stake in East Africa’s Sameer Group, CEO Craig Venter has confirmed to the FM that Altech is in talks to buy an SA telecom firm.
He won’t provide details but the acquisition, if it happens, is likely to provide a foundation for the group’s plans to build a telecom business in SA offering broadband data services. “It will be an existing player with a relatively good footprint,” is all Venter will say.
Altech already has a licence from industry regulator, the Independent Communications Authority of SA (Icasa), to operate a test data services network, using a wireless broadband technology known as WiMax.
The group is looking to a looming policy change that will allow traditional Internet service providers – companies that hold value-added network service licences – to compete with Telkom, Neotel and the mobile operators by building their own networks.
Altech, which released its interim results to August 31 last week, is already a big player in the telecom industry through its largest subsidiary, Altech Autopage Cellular. With almost 900 000 customers, Autopage is one of the country’s two big independent cellular service providers (the other is Nashua Mobile). It sells contracts and airtime for MTN, Vodacom and Cell C. Venter plays down suggestions that Altech’s plans to build its own network would endanger Autopage’s relationship with the three cellular operators. He says the cellphone companies focus mainly on voice, whereas Altech wants to build a data network.
The group’s plans – to build its own infrastructure and buy telecom assets – will go a long way in appeasing critics who say Altech has been sitting on a huge pile of cash – nearly R1,2bn at the half-year – for too long.
Venter replies that the planned acquisition of the Sameer Group, coupled with other acquisitions – fleet management company ComTech and vehicle-tracking company NetStar Malaysia – will noticeably reduce the cash pile. Altech has also been using its cash to buy back its own shares. In July, it bought and cancelled shares worth R102m.
The Sameer Group acquisition, whose terms are still being finalised, will give Altech a solid base in East Africa. Sameer owns Kenya Data Networks (KDN), the “pre-eminent data operator” in the region. It also owns Kenya’s Swift Global and Uganda’s InfoCom.
Altech’s interim results, meanwhile, were largely in line with analyst expectations but nevertheless disappointing. Headline EPS rose only 11% despite a 20% increase in turnover, to R4bn. Operating profit rose a modest 6% to R306m.
Most business units performed well, though there was one notable exception – the troubled NamITech, which manufactures smartcards. Venter has replaced the entire top tier of management at NamITech’s SA operation and the new management team, led by former Arrow Altech Distribution MD Philip du Preez, has moved quickly to remove R170m in annualised costs from the business.
NamITech, which Altech bought from Nampak a few years ago, posted a small profit in August and should remain profitable, Venter says. NamITech’s Nigerian operation, where the company supplies Sim cards to six cellular operators, continues to perform well.
Venter plays down a recent decision by pay-TV operator MultiChoice to adopt a two-supplier strategy for its decoders. The pay-TV operator, which has for years had an exclusive relationship with Altech’s UEC decoder manufacturer, recently appointed Dutch group Pace Micro Technology to supply it with decoders capable of receiving high-definition (HD) broadcasts. “They approached us a few months ago for an HD decoder but we did not have a product. We now do.”
UEC has recently won big contracts in India and elsewhere. It has net orders and contracts in hand valued at R725m, Venter says. Last month UEC manufactured 134 000 decoders. Venter expects demand for decoders in SA to rise once the four new pay-TV operators, which were recently licensed by Icasa, launch services next year.
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