Investcom sell-out chatter

With many of the region's mobile operators looking for acquisitions in the Middle East and beyond, it was expected that Lebanese telco Investcom, which last year listed on the Dubai International Financial Exchange (DIFX) and raised US$741 million through an IPO on London's stock exchange, would be among the leading players gunning for new licenses.

However, late last month the Beirut-based company announced it had accepted a $5.5 billion cash and share takeover bid from South Africa's MTN Group, despite previously claiming it would remain an independent mobile operator. The deal has mystified many industry insiders who had believed Investcom was set to add to its portfolio, which includes licences in Syria, Yemen, Afghanistan and Guinea.

"I find it extremely odd that you would list in Dubai then have an IPO in London and sell the whole company less than nine months later," says one London-based telecommunications analyst who wished to remain nameless. "The whole idea of having the IPO was to leverage their [Investcom's] expansion, so to sell up now seems very odd to me."

Investcom has more than 3.3 million mobile phone subscribers in sub-Saharan Africa and the Middle East and was strongly tipped to make a move into the Iraqi market, where some operators expect growth of 400 per cent over the next two years. After listing on the DIFX last year Investcom's CEO Azmi Mikati claimed the company was looking to capitalise on a 94 per cent jump in subscriber numbers between 2004 and 2005 by entering more new markets.

"Investcom is always examining investments in new markets, which offer growth prospects in under-developed mobile markets," said Mikati at the time. "Our recent licence wins in Afghanistan and Guinea demonstrate that. In terms of other potential acquisitions, we are looking at bidding for a licence in Saudi and Iraq, among others."

Following the MTN deal, Investcom's founders, the influential Lebanese Mikati family who control 71 per cent of the company's shares, will be one of MTN's largest shareholders, holding a stake representing roughly 10 per cent of the African firm's shares. Despite the scepticism surrounding the buy-out IDC's, top comms analyst Mohsen Malaki believes the deal makes sense for Investcom.

"From a strategic sense the Sub-Saharan Africa market is actually consolidating right now, so if Investcom hadn't partnered, merged or been acquired by another pan-regional player it could have been squeezed out of the market in the future," explains Malaki. "Investcom's cost structure would have been higher than their competitors who have a lower cost structure because of all the benefits that being a consolidated pan-African operation bring. If Investcom hadn't found such a partner I genuinely think it would have been squeezed out of the market."

As a result of the deal, MTN becomes the second-largest emerging markets mobile telecoms player with 28.1 million subscribers across 21 countries. Although it still trails Egypt's Orascom Telecom, the company's newly-extended footprint is expected to give it more clout when competing with the top Middle Eastern and European operator.

- The writer is a Paris-based freelance journalist.