UK’s development arm CDC to invest $180m in Africa’s Liquid Telecom

The CDC is investing $180m in Liquid Telecom, Africa’s largest independent fibre optic and cloud computing provider, in one of the biggest equity investments in the 70-year history of the UK government’s overseas development arm.

Liquid Telecom, which has built fibre optic networks across 13 African countries, including a Cape Town to Cairo link, said it would use the capital to accelerate its expansion in the face of what it called “exploding” demand for data in Africa.

Strive Masiyiwa, chairman of Econet Global, which has a 51 per cent stake in Liquid Telecom, said of the estimated 800m mobile phones in Africa, 300m were smartphones. He said he expected that number to double by 2020.

“The amount of screen time that people are spending on their mobile phones is averaging two to three hours now,” he said. “That is what drives our business. We need to provide data centres and build the network much more quickly.”

Liquid had been expected to launch an initial public offering in London this year, but had pulled back because of what bankers called adverse market conditions. Econet Media, a content provider division of the group, had run into problems rolling out services quickly enough after spending large sums on sports and entertainment rights, though Mr Masiyiwa said this was unrelated to the current capital raising.

“We were advanced in the Liquid IPO,” Mr Masiyiwa conceded, adding that CDC’s money was attractive because it was long term. “The IPO will still come, but we are no longer chasing it as a primary objective,’ he said. “We are not expecting to come to market in the near term.”

Nick O’Donohoe, chief executive of the CDC, said the UK development arm was taking a roughly 10 per cent stake in Liquid Telecom, giving the company an implied value of around $1.8bn, lower than some previous estimates.

“From a return perceptive we think it is a very attractive investment,” Mr O’Donohoe said, while “improved connectivity made a huge difference to people’s lives”. The investment “ticked both boxes” he said, referring to the CDC’s aim to both help poor countries develop and make a return for the British taxpayer.

“This is pretty close to our biggest investment ever,” said Mr O’Donohoe, who added that the CDC’s last big bet on telecoms was more than two decades ago when it invested in Celtel, a telecoms company founded by Sudanese billionaire Mo Ibrahim.

Mr Masiyiwa, a Zimbabwean businessman, said Liquid was in the process of building a fibre optic cable from Port Sudan on the east coast of Africa across the continent to Abuja, Nigeria’s capital. The group also plans to invest $400m in network infrastructure and data centres in Egypt over the next three years, according to an announcement earlier this week.

Liquid Telecom has built 70,000km of cable in southern and eastern Africa and is expanding into countries that lack affordable and reliable broadband, Nic Rudnick, the London-based chief executive said. That included countries such as Chad, Sudan and Democratic Republic of Congo, the latter a central African country the size of western Europe with internet penetration of only 6 per cent.

Liquid Telecom is primarily a business-to-business provider, supplying fibre optic and satellite services to the likes of MTN, Orange, Bharti Airtel and Vodafone.

Source: Financial Times