Mo's Millions

MTC Group's US$3.4 billion acquisition of pan-African mobile operator Celtel International valued the 21.7% stake held by founder and chairman Mohammed Ibrahim at US$738 million. Rather than contemplating a sumptuous retirement, Ibrahim is busying himself with the search for new investment opportunities.

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By  Tawanda Chihota Published  August 7, 2005

|~|Ibrahim200opener.jpg|~|Ibrahim says if the decision were his to make alone, he would have listed Celtel rather than sell it.|~|Mohammed Ibrahim’s offices may be located in one of London’s most exclusive districts, Mayfair, but the thoughts and plans of the Celtel founder and chairman are never far from his native homeland of Africa. Having built up his company to become the most comprehensive mobile communications provider in Africa in terms of coverage in just seven years, the sale of “his baby” to Kuwait’s MTC Group at the end of March, is a crowning achievement in his vision to create value on a continent where international investors remain sceptical about seeking opportunities. Mo Ibrahim relishes his position as a pioneer, a generator of new ideas, and he hopes to continue to be considered such in the future. He is particularly gratified by the role he has played in attracting Arab money to Africa, something he believes is a natural progression of the long-standing trading history shared between African and Arab peoples. “It was actually quite strange that no Arab money was involved (in Celtel until the acquisition by MTC),” Ibrahim tells CommsMEA. “And that is something I was uncomfortable with, and I spoke to many of my Arab friends about this anomaly. About why Americans and Europeans are willing to fund projects in Africa, and our Arab brothers are too shy about investing in Africa, which is only across the water from them, and the region that they traded historically with for many hundreds of years.” The subsequent investment by UAE operator Etisalat in West African telecoms outfit Atlantique Telecom is evidence that the tide may be turning at last in respect of Arab investment on the African continent. “It’s to do with the investment mentality. People need to break the mould and take the first steps, and other people will follow. That is what happens with capital. After I did this deal, you saw the flurry of deals that other Arab telecoms companies are doing in Africa and Asia and now everywhere,” Ibrahim comments. Ibrahim’s is a continuing journey to generate value from the African continent. Celtel was originally called MSI Cellular Investments, a company spun off from MSI, a telecoms consulting company founded by Ibrahim in 1989 and later sold to Marconi in the UK. Since it’s establishment in 1998, Celtel has focussed on the opportunity offered by low level of telecoms penetration in Africa, a strategy supported by capable and experienced management. “…One thing I have always thought is very important is corporate governance. It is something that, unfortunately, we don’t pay too much attention to in the African region or even in the Arab region,” Ibrahim comments. “Corporate governance is very important and one should split responsibilities between the board, the management, the shareholders and define the responsibilities of various people so that you ensure you avoid conflicts of interest,” he adds. MTC Group is an admirer of the management team Ibrahim has been able to assemble. “We intend to inject experience and technical skill into all the investments we make,” says Marwan Alahmadi, chief strategy officer of MTC Group. “But Celtel has already built up a strong management team with people like Louis Lubala (marketing director) and Tito Alai (chief marketing officer) who have worked at multinational companies like Unilever and have plenty of corporate experience.” Celtel also has the mantle of being the most successful African telecoms going concern to be acquired by a foreign investor. The sizeable cash offer from MTC made Celtel shareholders reconsider a planned stock market listing on the London and Johannesburg bourses, the London-listing of which was scheduled to occur on April 29, Ibrahim says. He explains that given Celtel’s large pool of investors including funds and venture capitalists, a shareholder decision was taken to liquidate all of Celtel’s capital through a sale, rather than partially liquidate it through a stock exchange listing. “…An IPO is only a partial exit, because our plan was to list the company in London…where we probably would have sold about 15-20% of the company and probably raised 10% in new shares. But that would not have been enough to provide pure liquidity for [the shareholders]; they would have had to wait a little bit…” ||**|||~|Ibrahim200.jpg|~|Ibrahim sees MTC's acquisition of Celtel as an example for further Arab investment in Africa.|~|As a shareholder, Ibrahim says had it been entirely up to him, he would have opted for a public offering rather than a complete sale of the company. “Absolutely, I would have preferred to IPO. I am not a fund and I don’t have a need to liquidate myself by a certain timeframe, I’m a long-term investor so I would have liked to look for the upside,” Ibrahim says. However, one can’t feel too sorry for Ibrahim having to sell his stake given the substantial premium the company was sold at versus its estimated valuation in the lead-up to the proposed IPO. Consensus opinion in the City of London and in Johannesburg had expected to see a valuation for the whole of Celtel in the range of US$2.2 billion - US$2.5 billion. MTC managing director Saad Al Barrak is unabashed in his belief that his company received value for money in the acquisition of Celtel. “…An IPO is not a fair indicator of value because where a single entity makes an acquisition; it is often willing to pay a large premium on the value,” Al Barrak says. “…So if you take a 30% premium [to the IPO valuation], which is very moderate, we are up to US$3.4 billion.” Acquisitive South African operator MTN was one such party that believed a valuation in excess of US$2.7 billion was too high for Celtel, and members of the analyst community in Johannesburg have largely supported that decision. “MTN opted against over-paying for Celtel assets and I think that’s a prudent move. There would have been obvious synergies between the two companies had such an acquisition come off, but in terms of value-retention, MTN was right not to pay over the odds,” a Johannesburg-based fund manager says. Despite having an installed base fast approaching the 7-million mark across 13 operational territories, much of Celtel’s intrinsic value remains in its further growth prospects in the most under serviced telecoms market in the world. “Everybody is looking for growth because that is what will define value,” comments Ibrahim. “Last year, the number of new subscribers in Africa was more than the number of new customers in North America. That is a fascinating fact isn’t it? And the reason why you haven’t heard it is probably because it is not well publicised. So there’s real growth in Africa,” he adds. Celtel expects to enter seven more countries by the first quarter of next year, according to Al Barrak, a proposition that Ibrahim views as business as usual for Celtel. Ibrahim expects to remain involved with the company he founded for some time yet, though he already has new projects on the horizon. As chairman of the board, he has time to follow his own pursuits, which include investing in his homeland, Sudan. In partnership with other shareholders, Ibrahim has already established a Kuwaiti-Sudanese holding company to invest in Sudan with capital of US$100 million. However, even as Ibrahim looks for new opportunities and ventures, it appears certain that a part of him will always belong to Celtel. “As for Celtel...this is my baby and I wish always that the company develops and as long as I am able to help and be the chairman, from that position I’ll help,” Ibrahim says. “When I say “my baby” it is a grown-up baby.” ||**||

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