Safaricom pays Yu Sh1bn for fibre deal

Safaricom CEO Bob Collymore. Photo/FILE  NATION MEDIA GROUP

By MARK OKUTTAH

Posted  Monday, December 2  2013 at  20:37

In Summary

• Safaricom offered rival Essar nearly a billion shillings to acquire its 10 per cent stake in The East Africa Marine System (TEAMS) in a deal that values the undersea fibre optic firm at Sh9.56 billion
• The Nairobi bourse-listed telecom acquired the stake from Yu mobile at $11 million (Sh955 million) to offer faster and more efficient Internet data services as well as support the upgrade of its network to 4G
• The deal pushed Safaricom’s ownership of the undersea fibre optic network to 32.5 per cent, a share that guarantees the operator additional capacity in TEAMS, which is offered based on shareholding

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Safaricom offered rival Essar nearly a billion shillings to acquire its 10 per cent stake in The East Africa Marine System (TEAMS) in a deal that values the undersea fibre optic firm at Sh9.56 billion.

The Nairobi bourse-listed telecom acquired the stake from Yu mobile at $11 million (Sh955 million) to offer faster and more efficient Internet data services as well as support the upgrade of its network to 4G.

The deal pushed Safaricom’s ownership of the undersea fibre optic network to 32.5 per cent, a share that guarantees the operator additional capacity in TEAMS, which is offered based on shareholding.

“Safaricom bought 10 per cent of the Essar stake for about $11 million,” Joel Tanui, the general manager of TEAMS in an e-mail response to the Business Daily.

Essar, which has been looking for a strategic investor to inject cash and stave off a liquidity crisis, says it used proceeds from the deal to sustain operations.

Yu, unlike Safaricom, is yet to lay down its own terrestrial fibre-optic cable, prompting the equity sale in TEAMS.

Safaricom said Friday it was the only shareholder in TEAMS that showed interest in snapping the Essar share.

Other shareholders are the Telkom Kenya (22.5 per cent), Kenya government (20 per cent), Kenya Data Networks (10.82 per cent), Wananchi Telecom (6.14 per cent) and Jamii Telecom (5 per cent).

This is the second time Safaricom is increasing its stake in TEAMS since 2009 when the undersea cable was built at a cost of $130 million (11.2 billion) as a joint venture between the government of Kenya and the operators.

This means that the market value of TEAMS has fallen below its construction costs by Sh1.64 billion.  

TEAMS is one of the four other undersea cables that link Kenya to the rest of the globe including Seacom, Eassy and LION owned by France Telecom—which has a 70 per cent stake in Telkom Kenya.

Cuts on the undersea fibre optic cables have pushed TEAM into losses in the year to March, according disclosures made by Safaricom.

Safaricom reported a loss from its initial 22.5 per cent stake in TEAMS for the year ended March 2013 compared to a profit Sh16.2 million received in 2012, the firm disclosed in its latest annual report.

Safaricom emphasised that the focus of the shareholders is not profits but an avenue for cheaper Internet.

The undersea fibre operators have helped cut Internet costs to $450 per megabyte per month compared to the $6000 that satellite providers used to charge in 2008.