Hidden in the big black box
Preferred bidder to be identified soon
THERE’S AN INDUSTRY BUZZ about the possible outcome of Naspers’s sale of MWeb. The most likely bidders seem to be Altech and Vodacom Business, although all who have expressed an interest have their lips sealed, as they’ll have been privy to confidential documents to help them make up their minds.
Both Internet Solutions and Vox Telecom would have been among the interested parties but neither seems the likely candidate to shell out the most money for the asset. Internet Solutions CEO Angus MacRobert and Vox Telecom chairman Tony van Marken said they couldn’t comment on prospective corporate activity or potential deals they might be looking at.
MWeb CEO Rudi Jansen says there’s been “very keen interest” in the company. Some of the interested parties were unexpected, and included some non-South African players. Rumours around this seem to focus on cellular operator Zain.
Although the talk around town – and the natural assumption, given that it’s being sold at auction – is that Naspers is simply out to get the best price for MWeb, Jansen says there’s more to it than that. Although conceding that “price is important”, Jansen says there are other factors, including finding a company that can execute MWeb’s strategy, black economic empowerment, some other “soft issues” plus competition matters.
Jansen agrees it would make little sense to choose a bidder that’s going to have trouble getting the deal past the Competition Commission. Which seems to suggest it could lessen Vodacom’s chances, though time will tell.
Perhaps we shouldn’t read too much into it but MWeb and Vodacom have cosied up, announcing earlier this month that MWeb would add voice to its range of data connectivity options and bundle that in a package offering to its subscribers.
Altech – which, like MWeb, also wants the option of rolling out a WiMax network – seems another likely contender. At the time of writing the outcome of Altech’s court battle challenging the right to self-provision was still unknown. Although it shouldn’t present any competition issues, it has work to do on the empowerment front.
Jansen says Naspers has identified a shortlist, although he won’t disclose how many companies are on it, as that could give away its advantage in negotiations. He says the auction process is progressing “quite well” and anticipates a preferred bidder should be identified “soon” – although he won’t be drawn on a specific timeline. That’s because it will also involve consulting competition authorities in SA and other African countries (MWeb has five subsidiaries in Africa) and consulting with the Naspers board once a decision has been taken.
MWeb would seemingly be most valuable to a player that could exploit the possibility of gaining access to WiMax spectrum. For that, MWeb first needs an individual electronic communications network service licence – which it’s in the running for – and 51% black empowerment ownership to qualify to bid for spectrum.
Jansen says WiMax isn’t a crucial factor for the sale but adds it’s “such a great opportunity” that MWeb is very excited about it and has been pushing very hard to gain access to the spectrum. Whether or not that would affect its valuation, Jansen
says that would be for the respective bidders to decide. Some
were in the running
for WiMax themselves, while others were not.
Jansen says MWeb had followed a similar process to that under which Verizon Business SA was sold, so the industry was familiar with the auction method. Absa also sold its Internet client base to Vox the same way.
MTN announced it had bought Verizon at end-June, and SA CEO Tim Lowry estimated it could take three to four months to obtain competition authority approval. The company says there’s no update yet.
Naspers first announced on 2 June that MWeb would no longer fit in with its strategic direction and that it would be sold. But surely if you have a great asset that’s been cultivated into a market leader over a number of years (since 1997) and it holds such great potential, why sell it?
Jansen says Naspers’s vision is to invest in online properties that attract their users from anywhere, whereas MWeb wants those users to come via its Internet service provider (ISP). That means there’s a serious “divergence” of strategy. “To grow MWeb you really do have to sell it,” he says.
On the valuation front, few think Naspers will get the R2,5bn the market believes it wants for MWeb. Particularly not if rolling out a WiMax network means it won’t make money for at least the following three years. However, if someone wants to be a converged telco player badly enough, perhaps it will pay up.