IF VERIZON BUSINESS SA’s strategy had been to hold out on overtures from telecommunications heavyweights, suck them into a bidding contest and then sell its assets to the highest bidder, then the strategy seems well worked out – at least given the profile of suitors that have declared an interest in the company.<\/p>\n
With the elimination of Vodacom, Vox Telecom and Internet Solutions (IS, owned by Dimension Data) from the bid process, a source close to the negotiations says the battle for one of SA’s top tier telecoms service providers has narrowed to two contenders: MTN and Altech.<\/p>\n
For a long time Verizon has reportedly been on the chopping block, with Vodacom earlier identified as its most persistent suitor. But management has obdurately downplayed such talk. Formerly known as UUNet, Verizon’s business – whose footprint extends to Namibia, Botswana, Zambia and Kenya – is a telecoms and Internet services provider in the niche corporate market.<\/p>\n
Conservatively valued at R1,3bn, Verizon would be a huge gamble for any prospective buyer but not for cash-flush duo MTN and Altech. Among Verizon’s prized assets – by virtue of being a subsidiary of US telecoms giant Verizon Wireless – is a shareholding interest in SAT-3, the undersea cable linking SA to the rest of Europe and an extensive telecoms backbone.<\/p>\n
Verizon SA country manager Angela Gahagan declines to comment on speculation with regard to its future but maintains that it’s been business as usual for her management team. “The decision to sell is basically a shareholder issue. That I’m not aware of any negotiations in that regard is all I can say for now.”<\/p>\n
MTN was equally guarded but has made no secret of its intention to become a significant player in the converged communications market, a bastion for the established likes of Telkom, IS and Verizon.<\/p>\n
But Altech CE Craig Venter’s admission that Altech was prowling for strategic acquisition opportunities of top tier telecoms companies, both in SA and overseas, gave the slightest of hints that Altech is in the running for Verizon SA.<\/p>\n
Says Venter: “I can’t comment on speculation – but of course I can confirm that our strategy is to play in the African telecoms space. We’ve just concluded a deal in which we’ve acquired controlling interests in three subsidiaries of Kenya’s Sameer ICT group.”<\/p>\n
For US$82m (R673m) the deal sees Altech acquire a 51% shareholding in Kenya’s data networks, SwiftGlobal Kenya and infocom. As the leading broadband network operator in East and Central Africa, its latest acquisition in Kenya provides Altech with the perfect opportunity to participate in the high-growth converged technology wave, says Venter.<\/p>\n
Access to SAT-3 and Verizon SA’s backbone would complement Altech’s strategy to play in the African broadband and telecoms sectors, says Brian Nielsen, a telecoms analyst at research group BMI-T. “In the new deregulated telecoms dispensation, consolidation is set to become a buzz word. Whichever way the pendulum swings in the battle for Verizon SA, the move towards convergence is certain to spark a flurry of consolidation deals, some of which have already been concluded.”<\/p>\n
In the post-deregulation era, Vox Telecom (formerly Datapro) has led the pecking order with a series of high-value consolidation deals that have seen it fold Orion telecoms (the underperforming Absa Internet), Storm telecoms and, most recently, @tlantic. GijimaAst is also reported to be entertaining overtures from BT Group.<\/p>\n
“The trouble is there aren’t many companies in the market and some may have no choice but to start deploying infrastructure from scratch,” says Arthur Goldstuck, executive director at World Wide Worx. With the promise to radically alter SA’s telecoms tariff landscape, Vodacom recently unveiled a multi-billion rand project that will see it deliver high-speed Internet and broadband services to the corporate sector. It’s already spent close to R1bn in deploying infrastructure, such as fibre optic rings, in SA’s larger metropolitan areas.<\/p>\n
With the imminent sale of Verizon, analysts say SA has reached a tipping point where the telecoms and broadband wars will induce drastic cuts in the tariff structure.<\/p>\n