JOHANNESBURG – At least US$10 billion will exchange hands across Africa’s telecoms, media and technology markets (TMT) in 2019, driven by stronger investor appetite for mergers and acquisitions (M&As) and initial public offers (IPOs), according to data from researchers at the London based TMT Finance.
Digital and broadband infrastructure investment has emerged as the biggest priority for Africa’s leading telecoms firms, with huge financial backing from investment firms.
A robust rise in demand for broadband and sharp rises in opportunities for 5G and fibre have ignited investor interest in new investments into digital infrastructure, leading telecoms analysts say.
TMT Finance and several chief executive officers (CEOs) in Africa’s telecoms sector have said 2019 will be a good year for the continent, which this week witnessed one big deal, after Johannesburg based cellular phone operator, MTN sold its 53 percent shareholding in Mascom Botswana.
The stake was taken over by Zimbabwean born billionaire, Strive Masiyiwa, who paid US$300 million for the deal.
The transaction further consolidates his already strong influence on the African telecoms landscape, where he already controls the Zimbabwe listed Econet Wireless, a behemoth sitting on about 10 million active subscribers.
In February about US$1billion exchanged hands through the sale of South African datacentre firm Teraco Data Environments to US private equity investor, Berkshire Partners. Teraco was reported to be valued at 22 times its 2018 EBITDA of US$40 million to US$45 million at the time of the deal.
This reflects outstanding growth expectations on the continent, which many analysts compared to the growth that has been reported in the European and US datacentre businesses.
The sale of the Permira-owned datacenter also attracted interest from global industry players Equinix and Digital Realty.
“Telecom, media and technology infrastructure mergers, acquisitions and fundraising in Africa is predicted to continue growing in 2019. TMT Finance predicts that transactions for the year will exceed US$10 billion, due to increasing deal flow across the region and appetite from global industry and investors,” TMT said in a report.
“TMT Finance has said that it expects 2019 to be a record year for investment and M&A deals in TMT infrastructure in Africa with many large deals planned, particularly by telecom infrastructure providers looking to make public flotations to tap into public investment fund appetite and fuel further growth plans. These include leading regional African digital and mobile telecom infrastructure operators Liquid Telecom, IHS Towers, Eaton Towers and Helios Towers Africa, all of which have been hiring investment banks to arrange for IPOs and are expected to float or consolidate their sector in the next 12 months,” said TMT.
Liquid Telecom is part of Masiyiwa’s growing telecoms, media, technology and banking empire.
Telecoms operators including Madagascar’s Towerco and Wananchi in Kenya have engaged investment banks for sales, while large regional subsea cable businesses such as South Africa’s Seacom and MainOne of Nigeria are also thought to be weighing up sale and investment options, according to several reports.
African telecoms deals are expected to come under the spotlight during an industry conference in Cape Town, South Africa, at the end of this month, when leaders meet to digest a string of opportunities coming up on the continent. According to Byron Clatterbuck, chief executive officer at Seacom there are great opportunities in making the case for fibre in Africa. “Fibre penetration is still very low in most African countries, so huge opportunities exist to get involved in the rollout of intra-regional projects, national projects, and even international subsea infrastructure projects. The global cloud services companies are now putting Africa on their development roadmap, and committing significant investment to several African markets,” Clatterbuck notes.
He says this opens up opportunities for investors.
Alexander Kiel, chief finance officer at CSquared, the Google-backed African fibre network operator, says he sees consolidation of Africa’s telecoms sector in 2019.
“Fibre, like other infrastructure, is a game of scale, we do expect some consolidation to happen over time, with it most likely to start with transfer of management of public fibre assets to private operators,” he says.
Over time, as fibrecos increase in scale and expertise, Kiel also expects to see more sale and lease-back deals between the fibrecos and the mobile operators.
For Seacom’s Clatterbuck funding opportunities for African M&As are available.
“Whether it is MNOs trying to bring together a number of African “OpCos” under one brand with synergies at the group level, or it is “fixed” fibre operators consolidating to control and manage as much of the end-to-end network as possible, there is no shortage of M&A and funding opportunities in Africa,” he says. “Consolidation will continue as markets grow and possibly shrink, and as global players look for market entry vehicles going forward,” he says.
