Econet pays out US$87,5m for Altech

Econet pays out US$87,5m for Altech

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By Lesley Stones

ECONET Wireless said Thursday it would pay Altech $87,5m to buy back the 50% Altech bought in its cellular network business for $70m just nine months ago, avoiding a costly legal battle.

The two parties were due to go to court to disband their joint venture following irreconcilable differences brought about by conflicts of interests.

The steep 25% return on the original investment and the decision not to invoke lengthy litigation triggered a temporary 110c surge in Altech's share price yesterday.

The partners initially hailed the tie-up as benefiting both sides: Altech gained a foothold in the lucrative cellular business, while Econet gained the finances to expand its operations. Yet their different cultures made analysts doubt their compatibility.

The deal soured over Econet's activities in Nigeria, where it holds 5% of V-Mobile. Econet is fighting a legal battle to prevent V-Mobile from selling a controlling stake in the business to Vodacom, Econet's far larger rival. That was awkward for Altech, which is a technology supplier to Vodacom.

Altech tried to persuade Econet to accept a 10% stake in V-Mobile and let Vodacom buy 51%. Altech stood to benefit enormously from that deal, as it would have bought 10% of V-Mobile for itself.

But Econet refused to capitulate, scuppering Altech's hopes of profiting in Nigeria, and collapsing the deal.

Altech applied to the high court in Botswana to have the joint venture wound up, or for an order that one party should buy the other out for $100m.

Econet CEO Strive Masiyiwa described the legal action as "bizarre," saying that a settlement could be thrashed out around the table in 48 hours.

Econet will buy out Altech in three tranches, with the last $60m due on October 29. Masiyiwa insisted cash was available, saying several other financial backers have offered to invest in Econet.

The settlement sees both sides waive all claims against each other, and leaves Altech looking for a new way into the cellphone sector.

Yesterday Altech said it would continue to pursue opportunities to acquire and develop interests in network operations in Africa or elsewhere, preferably in partnership with existing operators.

One analyst has criticised Altech's cellular focus, saying it should rather expand its existing subsidiaries, which include Netstar, Autopage and NamITech.

CEO Craig Venter would not comment further as Altech is in a closed period, but his statement said Altech would also continue to explore other acquisitions for all its core activities - Business Day
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