Hid­den in the big black box

Pre­ferred bid­der to be iden­ti­fied soon

Finweek English Edition - - Communication & Technology - BELINDA AN­DER­SON

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.



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