MTN to acquire Investcom for USD5.5 billion; Investcom to pull out of Millicom bid

3 May 2006

Africa’s largest mobile group, South Africa-based MTN Group, has offered to buy Lebanese telecoms holding company Investcom for USD5.5 billion, as part of its growth strategy in emerging markets. At the end of 2005 Investcom had 4.9 million customers in Africa, the Middle East and Europe. The Beirut-based company, which uses the Areeba brand name, owns mobile operations in Benin, Cyprus, Ghana, Guinea Bissau, Liberia, Sudan, Syria and Yemen, and has licences to build networks in Afghanistan and Guinea. MTN has no networks in those countries. Investcom also provides international carrier services, principally through Med Net, a subsidiary based in Monaco, fixed telephony services in the UK and telecoms engineering and consulting services. MTN said the merger would create a group servicing 28.1 million subscribers in 21 countries. The South African giant’s CEO, Phuthuma Nhleko, said that the two companies ‘have a shared vision to be the leader in developing markets and both have already shown progress individually in this regard’. If the deal goes through, the combined group may bid for Saudi Arabia’s third mobile licence later this year.

MTN has offered USD3.83 per Investcom share and an alternative of USD2.08 in cash and 0.18 MTN shares per Investcom share. M1, the Singapore-based cellco which owns 70.6% of Investcom, has agreed to the cash and stock alternative, saying that it will not sell its MTN shares for 14 months. MTN will borrow USD3.85 billion from Deutsche Bank’s London branch to fund the cash portion of the acquisition. The offer is subject to regulatory clearances for Investcom’s companies in Ghana, Sudan, Syria and Yemen; a formal offer is due by 23 May

Before the deal, MTN was already the biggest mobile operator in Africa, with more than 22 million customers in ten African countries and Iran. Its close rival, fellow South African group Vodacom, has more than 21 million subscribers, whilst a third Pan-African player, Celtel, majority-owned by Kuwait-based MTC, has around nine million consolidated mobile users.

Investcom, founded in 1982, sold USD741 million worth of shares in an initial public offering (IPO) on the London stock exchange last October, the biggest ever international stock sale by a Middle East company. The IPO allowed its co-founders, Chairman Taha Mikati and former Lebanese Prime Minister Nagib Mikati, to reduce their stakes. Shares of Investcom also trade in Dubai, United Arab Emirates. Investcom recently emerged as one of the leading bidders for Luxembourg-listed mobile holding group Millicom, which also operates in several African countries and is expected to be sold for up to USD5.4 billion. However, Investcom said yesterday that it had withdrawn its non-binding offer for Millicom.

Lebanon, Luxembourg, South Africa, Millicom International Cellular (MIC), MTN Group