Starcomms reaches agreement on $210 million CAPCOM investment

Ben Uzor Jr

Starcomms Plc, has said it has reached an agreement with CAPCOM Limited to provide it with a capital investment of cash and assets independently valued at $210 million. This new development comes week after minority shareholders of the telecoms operator filed a perpetual injunction to prevent Starcomms Plc from progressing with any merger, or business combination or transaction that alters shares held by them. Industry analysts told BusinessDay, yesterday that decision would give the CDMA segment a new lease of life as the much expected business combination of Starcomms Plc, Multilinks and MTS will finally come to fruition.

For sometime, CDMA operators – also known as Private Telephone Operators (PTOs) have found it difficult to survive the stiff competition in the nation’s $3.9 billion telecoms market. Starcomms Plc, according to a statement made available to Benuzorreports, said: "CAPCOM has agreed to cause the contribution to Starcomms of certain CDMA assets over which it intends to acquire control in separate but related transactions. "CAPCOM will contribute to Starcomms assets including the spectrum licence of MTS and the CDMA mobile telecoms business of Multi-Links."

In addition to facilitating the CDMA consolidation, Benuzorreports gathered that CAPCOM will provide $98 million in cash to finance the post-acquisition integration of these assets, to meet on-going short-term losses in the business and to deliver the combined company’s new business plan. In return for its investment into Starcomms, it was learnt that CAPCOM will receive new Starcomms shares which will result in CAPCOM owning 90.5 percent of Starcomms restructured issued share capital.

"In consideration of their proposed sales of certain assets to CAPCOM, both Helios Towers Mauritius Holdings Limited and Asset Management Corporation of Nigeria (AMCON) will own stakes in Starcomms (together representing less than 12 percent of CAPCOM equity following CAPCOM's investment) derived from CAPCOM's shareholding on completion", the statement said. Industry analysts said that the proposed transaction  will create a leading CDMA operator in Nigeria and represents a fundamental step as part of the consolidation move in the Nigerian telecoms industry.

With the benefit of the 20 MHz of contiguous 1900MHz spectrum to be held by the consolidated operations, the largest spectrum allocation for any mobile operator in Nigeria, Starcomms will be at the forefront of the shift away from current generation of services into a Long Term Evolution (“LTE”) technology platform. This, according to the industry analysts will provide CAPCOM with the capability of delivering new 4G and related data and other services that will offer customers substantially improved performance. "Monetizing the new broadband services and applications will provide Starcomms with crucial first mover advantage in the Nigerian market with its 4G / LTE network rollout" according to the statement.

The agreement is subject to Starcomms shareholders approving the proposed Scheme of Arrangement (the “Scheme”) pursuant to Section 539 of the Companies and Allied Matters Act, 2004 (CAMA) which will be effected to reorganise Starcomms’ share capital as well as the Private Placement of new shares to CAPCOM. The Transaction will also be subject to Court sanction and regulatory approvals, including approval from the Securities and Exchange Commission and The Nigerian Stock Exchange. As part of the overall transaction, Benuzorreports gathered that existing shareholders will be offered the opportunity to make additional investments in Starcomms via a 1:1 Rights Issue upon the same conditions at which CAPCOM is receiving its share allocation.

 "The Rights Issue will be launched subsequent to the closure of the Private Placement. Starcomms shareholders will have the opportunity to vote on the resolutions to be proposed at the Court Ordered Meeting and the subsequent AGM of the Company to be scheduled. The Company will announce the date for the shareholder meetings in due course." The Company’s Board of Directors believe that the proposed transaction represents the best option available to Starcomms to effect a strategic turnaround, improve the Company’s financial position and retain value for its stakeholders.

Starcomms’ Interim CEO, Olusola Oladokun commented: "The proposal from CAPCOM will enable Starcomms to reduce its high level of borrowings and improve its low liquidity position. Given the significant challenges the business has faced over the last two years, CAPCOM's investment will facilitate a strategic turnaround, improve the competitive position in the market and place the Company on a growth path for the future." Starcomms was advised on the Transaction by CanaccordGenuity Hawkpoint and Stanbic IBTC. The company said a further announcement will be made in due course. CAPCOM was founded by MBC, a trust of 20 years standing whose portfolio companies manage over $1.25 billion in the asset management and commercial banking sectors focused on emerging markets. CAPCOM has attracted a group of family offices and funds committed to investing in the Nigerian telecoms industry and participating in the development of the sector.