Tekedia Analyzes Visafone Failed Acquisition of Multilinks – Connects Helios Investment Partners, Telkom and Helios Towers

Helios Towers rents out towers so that telecommunication operators can provide network coverage and build. They do this largely in Africa with Nigeria as one of its big markets. Helios Towers is a division of a private equity firm founded by a Nigerian UK based Harvard graduate who also invested in First City Monument Bank before the crash. This company has quite a war chest under management. Tekedia recalls that the Helios founder received an award from Harvard African Business Club few years ago for their vision and execution. His name is Tope Lawani. Tekedia  confirms that Helios Investment Partners holds rights in Helios Towers.

 

In November 2009, Helios and a group of investors including Soros Strategic Partners LP, RIT Capital Partners plc and Lord Rothschild’s family interests, Albright Capital Management LLC committed US$350m to Helios Towers Africa Limited (“HTA”). HTA, a newly formed company will build and maintain telecommunications towers and lease space on those towers to wireless telecommunications services providers across Africa.  With the launch of HTA’s operations across Africa, operators will be able to outsource non-core activities and passive infrastructure, allowing them to focus capital and managerial resources on improving their core products and services. The deployment of HTA’s tower sites will increase telecommunications coverage, helping wireless operators roll out their services more economically and enabling the extension of affordable mobile services to semi-urban and rural areas. With the initial equity commitment, the financial flexibility of its shareholders, and the in-region operating experience of Helios Investment Partners, HTA anticipates establishing itself as the most experienced, operationally capable and best independent tower operator in Africa.

 

Visafone has expected to have a home run by acquiring Mutilinks so that it can compete better. Through customer service, Visafone has made progress in Nigeria and was looking for consolidation. But that has not worked out very well. Telkom South Africa and Helios Towers battled over lease agreement of the towers. That legal impasse might have resulted to the collapse of the acquisition as we reported this morning. Visafone’s takeover of MultiLinks is contingent on the settlement of the case with Helios Towers.

 

Helios Towers has filed the $252 million suit  against MultiLinks over an “anticipatory breach of contract” . And that was mainly to prevent Telkom from selling MultiLinks assets to Visafone.

 

Last year, Telkom stated that it was dis-investing from the Nigerian CMDA market because of of competition which has resulted to many loses. Multilinks was not making money in Nigeria and Telkom had invested in this company; it bought over the company in incremental acquisition. The CDMA player could not just compete with the GSM giants.

 

The true owners of Helio Towers, Helios Investment Partners which in London has played a major role throughout this process. An analyst told us that this private equity firm cannot sustain another major business loss when it bought FCMB shares in 2007 only for the market to crash. They had taken about 16% of the bank with investment of $50m investment. That also put Tope in the FCMB board.  So in December they filed a legal complaint against Telkom’s MultiLinks unit regarding the leasing of cell phone towers in Nigeria.

 

Multilinks challenged the validity of the agreement based on land where the towers had been built. But it was tossed out last week by a Lagos High Court. That was when the pendulum flipped against Telkom Africa. They began the plan to move out of the whole Multilinks plan.

 

Telkom South Africa has had tough times recently. Bloomberg reported that even meeting their estimates has been hard.

 

Telkom South Africa Ltd. (TKG SJ): Africa’s largest fixed- line telephone operator publishes earnings statements for the year ended March. The company expects to report a loss when compared with a restated profit of 8 billion rand ($1.2 billion) a year earlier, it said in a statement on May 31. That would be the company’s first loss since a 2003 initial public offering. The share lost 3 cents, or 0.1 percent, to 37.05 rand.

 

So this news has affected this moribund South African company. It simply shows that it is not automatic to succeed in Nigeria. We just checked the stock value of Telkom (TKG SJ) in the South Africa stock exchange and noticed a huge loss. With this continuous bad news, the company is indeed having a bad time.  The Lagos High Court ruling killed any prospect in the Visafone Multilinks deal going through. Now, they have to find time to disinvest and sell assets. Of course they can make somethings out of this since they have about 7,000 km fiber optic cable (FOC) and 2,000 km jointly shared with MTN and Glo.

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