Consolidation to drive telecoms M&A in Africa

Merger and acquisition (M&A) activity in the information and communications technology sector in Africa is likely to pick up, law firm Norton Rose said on Monday.

Factors pointing to increased M&A activity included increased competition between mobile phone operators, a surge in demand for broadband services and a continued desire to expand footprint areas in emerging economics.

Norton Rose Group lawyer Oliver Stacey said in a statement that consolidation in certain African markets would influence corporates over the next few years.

“In some crowded markets, operators were seeking to consolidate to achieve synergies, scale and improve performance. Most European countries had between three and five mobile operators a country, while some African countries could have as many as eight,” said Stacey.

Consolidation enabled stable, profitable businesses to invest in the network to improve quality and coverage. However, should consolidation not be adopted, the operators would be required to continue to mitigate their cost base, he added.

Norton Rose South Africa director Julian Jackson said that to reduce capital and operation costs, many operators were outsourcing their networks, information systems and other support functions, which enabled the operators to focus on their core business.

As competition in Africa increased and smaller players struggled to compete, an opportunity would arise for telecoms companies to buy distressed assets. Further, the number of network infrastructure deals would increase as some operators sought to control costs and monetise assets.

However, the period for obtaining authorisation for deals in terms of competition law was lengthening in many cases and, recent macroeconomic events, government instability and an increased focus on anti-corruption and bribery have exacerbated this challenge.

 

Source: Engineering News.Com – Natasha Odendaal – 9 Jan 2012