Celtel and KenCell in mega deal

HEADNOTE

Celtel International, known as Mobitel International until the beginning of this year, has entered into an historic agreement with one of the two major mobile operators in Kenya, KenCell. ADAM JONES has the details.

Celtel

International, the leading panAfrican mobile communications group, is investing $250m in Kenya to acquire a 60% majority stake in KenCell Communications Ltd - a leading mobile operator in Kenya, formerly owned by Vivendi Telecom International. In one of Kenya's largest-ever corporate transactions, Celtel will take over KenCell's shareholder debt and further develop the business.

KenCell, with its 'Yes!' brand, is one of the two major mobile network operators in Kenya. The founding local partner, the Sameer Group of Companies, will continue to hold 40% of the equity in KenCell.

Celtel intends to invest in KenCell in terms of network, product development and expertise. The group brings economies of scale in technology procurement and opportunities for KenCell staff in training and career development. The transaction has gained the full approval of the Communications Commission of Kenya and all other necessary government and regulatory clearances.

According to ITU, Africa is the world's fastest growing market for mobile communications. As a Dutch company with a strong shareholder base in the US and UK, Celtel International has been well positioned for the opportunity presented by the deregulation of the telecommunications sector in Africa. Increasingly, as some European operators have refocused on home markets and as local operators have encountered financial difficulties, there are consolidation opportunities in the market.

Celtel has operations in 13 countries and is the leading operator in nine of these markets. The investment in CeltePs network and more recently the relaunch of the Celtel brand is proving to be a good platform for expansion; Celtel is Africa's fastest growing mobile brand. In addition to Kenya, Celtel operates in Burkina Faso, Chad, Democratic Republic of Congo, Gabon, Malawi, Niger, the Republic of Congo, Sierra Leone, Tanzania, Uganda and Zambia.

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Celtel International chairman, Mohamed Ibrahim: delivering strong subscriber growth through strategic acquisitions.

Celtel is a major shareholder in mobile network operator Mobitel in Sudan and is a founding shareholder and minority partner in Vodafone Egypt. It manages the major fixed-line operation in Tanzania.

Celtel International performed strongly in the year to December 31 2003, with revenues up 42% to $446.2m, from $314.Om, on a proportionate basis. The group recorded a net profit after tax of $73.9m in 2003.

Shareholders in Celtel include: CDC Capital Partners, a leading risk capital investor in emerging markets, with over $1.5bn invested in some 50 emerging countries; IFC (International Finance Corporation) the private sector arm of the World Bank and the largest source of private equity for developing countries; AIG Infrastructure Fund, sponsored by AIG and managed by EMP, the largest private equity infrastructure manager in emerging markets with nearly $5bn under management; Zephyr Asset Management, the USbased emerging market fund; Citigroup, the global financial services group; Bessemer Venture Partners, the investment arm of one of the oldest funds in the US; Palio, the Swiss technology investment company; FMO, the Dutch development institution; DEG, the German development institution; Old Mutual Asset Management in South Africa; Capital International Inc., the major US investment group; and Blakeney Management, the London-based emerging markets investment company.

OPERATORWITH LARGEST FOOTPRINT IN AFRICA

Celtel International was previously called MSI Cellular and was renamed in January 2004. The acquisition of KenCell extends CeltePs reach into one of Africa's fastest growing markets, significantly increases the number of users, fills a gap in the group's geographical coverage and importantly, will enable Celtel to be the only organisation to develop an East African network covering Kenya, Uganda and Tanzania.

Celtel is funding the acquisition with a combination of new equity from existing and new shareholders, and funds raised from asset disposals and debt.

Marten Pieters, Celtel International's chief executive officer, commented: "This is a very important acquisition for Celtel. This reaffirms our position as the fastest growing mobile operator in the fastest growing market in the world. It also gives us both scale and scope in the East African region.

"As the operator with the largest footprint in Africa, we bring a broad understanding of the trends and challenges of mobile telephony; the perfect complement to KenCell's successful experience in Kenya. We are committed to developing African networks, with over $300m planned for capital investment in existing operations this year.

"Kenya is one of the more established mobile markets in Africa. It still has a significant potential for organic growth in the next few years to increase penetration levels to 10% from 7% today. We look forward to integrating the 1.2m KenCell customers into Celtel."

Mohamed Ibrahim, Celtel International's chairman, said: "We are delighted to be making this substantial investment in one of Africa's most promising economies with a significant opportunity for telecommunications development. The support we have had from our shareholders and lenders is a testament to Celtel's reputation for developing quality networks and delivering strong subscriber growth in the African markets.

"We welcome Sameer, Kenya's leading business group, as a partner of Celtel in KenCell. We welcome KenCell's excellent management and staff into the Celtel family. We look forward to working with them to deliver quality international and regional connections and customer service that are the hallmarks of Celtel."

KenCell was founded by the Sameer Group of Companies and Vivendi Telecom International (VTI), part of Vivendi Universal. KenCell was awarded a licence to operate mobile phone services on January 28, 2000. It was the second company to be awarded a licence to operate in Kenya on GSM technology. Services were officially launched in August 2000, with the prepaid service being launched in November 2000. The company now has 1.2m mobile subscribers. KenCell products and services are marketed under the 'Yes!' brand.

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Celtel CEO Marten Pieters: planning $3Oom of capital investment in existing operations this year.

KenCell's network includes coverage of the following major centres: Nairobi, Mombasa, Kapsabet, Kericho, Kisii, Kisumu, Kitale, Malindi, Malindi-Kilifi, Meru, Mumias, Muranga, Nakuru, Nanyuki, and Narok.

Philippe Vandebrouck, managing director of KenCell, said: "We are delighted to be joining the number one pan-African mobile network. The strong alliance of Celtel with the Sameer Group of Companies in Kenya is a fantastic opportunity for KenCell. Being part of Celtel will bring regional synergies to KenCell as well as career opportunities for our experienced staff."

Naushad Merali, chairman of Sameer Group, said: "Today I am proud to announce that the biggest commercial agreement ever signed in Kenya has confirmed that our new business partner will be Celtel.

"Dr. Mohamed Ibrahim, the chairman of Celtel, is an African business leader with a clear vision for the future of this continent and for the role that telecommunications must play. Celtel's commitment to Kenya in terms of investment demonstrates the confidence they have in the growth and future of Africa."