MTN’s R1 billion valuation of Afrihost

Industry speculation claims that MTN valued Afrihost at R1 billion, and therefore paid R500 million for a 50% stake in the company.

On 2 June 2014 the companies announced that MTN is buying 50% +1 of Afrihost’s shares, and the current Afrihost shareholders are retaining the remaining 50%.

“The Afrihost acquisition will add scale to MTN South Africa’s online ICT service offering which is focused on the consumer and SME market,” MTN said in a press statement.

“MTN South Africa expects to leverage off Afrihost’s strong customer service, value proposition, and agility, thereby boosting MTN South Africa’s presence in the SME, Corporate/Consumer and Connected Home segments.”

Afrihost selling price speculation

Afrihost and MTN did not disclose any financial information associated with this deal.

However, two independent industry sources with knowledge of the transaction told MyBroadband that MTN valued Afrihost at R1 billion.

It should be noted that MTN did not necessarily pay R500 million in cash for its Afrihost stake – the deal may well have been structured differently. There is currently no clarity regarding this issue.

One industry source said that all the executive Afrihost directors – Gian Visser, Brendan Armstrong, Peter Meintjes, and Greg Payne – signed long term employment contracts as part of the agreement.

Speculation further suggests that MTN wanted to buy 100% of Afrihost, but the directors refused.

According to the source, Afrihost believes that it can revolutionise the South African telecommunications market with MTN, hence the directors wanted to keep a strong shareholding in the company.

Afrihost would not confirm or deny the speculation.

“As per the terms of our agreement with MTN, we have agreed to keep information regarding our performance confidential. So unfortunately we cannot share this information,” said Afrihost CEO Gian Visser.

MTN would also not comment on this issue.

“In line with internal corporate governance, as well as JSE requirements, MTN does not comment on market speculation,” said Nik Kershaw, Executive, Investor Relations, MTN Group.

Visser did, however, confirm that Afrihost’s revenue for the last financial year exceeded R400 million. Visser could not disclose the company’s profit.

This article first appeared on MyBroadband

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