Category Archives: Helios Partners

Telkom nationwide coverage across Kenya

Telkom has got extensive coverage across Kenya. For companies, Telkom Enterprise offers the best options in three different packages of data and voice products in all counties that can be tailor-made to suit any customer’s needs:

  • BVPN (business VPN) provides connectivity for large companies and is available in all the 47 counties of Kenya. BVPN can also be extended to even more remote areas using satellite and is scalable which means a company can add new locations with voice and video. This is ideal for large companies with a presence in different locations that want security and which have sensitive, encrypted data that needs to be transferred nationwide.
  • JamboNet is a dedicated access offering with fast reliable Internet for businesses that range from 1 MBPS to 150 MPBS. An online customer portal enables monitoring and reporting and the service is backed by a strict service level agreement (SLA) that aims at 99.9% uptime.  The quality of JamboNet service does not degrade as more users join on, and it comes with a firewall as a standard. JamboNet is available nationwide and there is also a wireless option to extend the service to areas that don’t have cable already
  • E@zyNet is an unlimited fixed bandwidth solution for SME customers. There are different monthly cost packages starting at an affordable price of Kshs 3,499 (~$35 per month). It is easy to start and reliable, offering high download speeds and flexibility for users.

Telkom, which has data centres and cloud storage also manages the Kenya government’s National Optic Fibre Backbone (NOFBI) – a national inland fibre optic cable network. Telkom has also invested in VSAT, satellite communications in remote areas, a terrestrial fibre optic cable network, GSM, and 4G LTE. Other products that are optional include free intra-company calls (within a local user group), wireless landline, fleet management, and County government solutions and other value-added services designed for hospitals and schools.

According to the latest Communications Authority of Kenya quarterly report (December 2016), the number of fixed fibre optic subscriptions grew by 18% during the quarter while that of fixed cable modem subscriptions increased by 2.8%. In a statement, Managing Director of the Enterprise Division at Telkom Kenya, Kris Senanu said “success for a Kenyan enterprise should be seen in the lens of reduced downtime through reliable connectivity; operational efficiency through uninterrupted connectivity; great customer service and clear communication lines with stakeholders and ultimately revenue-generating that leads to business growth.”

Rediscovering Telkom Kenya

Monday’s nationwide outage of telephone, internet data, and mobile money services showed the practical need for people and companies to have viable alternatives for their daily connectivity. One of the oldest companies in this space is Telkom Kenya.

While it has been in the news more for its foray into mobile phone business under the Orange brand, other parts of the company have continued to chug along providing affordable and reliable services to customers, governments, and institutions  all across the country

Telkom Enterprise has three key connectivity products:  JamboNet for large businesses, E@synet Broadband for SME’s, and Flybox for homes and small businesses. Telkom has continued to invest and grow its infrastructure as well as through partnerships in submarine cables to extend broadband connectivity. The Telkom Kenya Entreprise division is now led Kris Senanu, long-associated  with Access Kenya and the history of internet service businesses in Kenya. Telkom manages the National Optic Fibre Backbone (NOFBI) for the Kenya Government and was recently contracted to roll out free Wi-Fi to over one thousand,  government-funded, incubation hubs in 290 constituencies around the country.

Telkom is 60% owned by Helios, an Africa-focused investment firm, and the Kenya government owns the other 40%. Other investments by Helios in Kenya include Africa Oil, Vivo Energy, and the Wananchi Group. It is also invested in Interswitch which supports financial connectivity services at a dozen Kenya banks and 1,000 ATM’s.

M&A Moment: June 2016

Various deals in the last few weeks and months in East Africa

Banking:

  • Barclays sold 12% of Barclays Africa for $873 million, reducing its’ stake to 50.1%. In Kenya, the Central bank said their feel like `flower girls’ in the Barclays exit for which Barclays says it has attracted ‘over 100’ offers.
  • At Chase Bank suitors are lining up to buy the bank that’s now out of receivership. KCB and QNB of Qatar are tipped as leaders, but there are as are a few other mid-size banks said to be interested.
  • Cooperative Bank plans to do a joint ventures to expand into Ethiopia and Rwanda following in the model that was succesful in South Sudan. This will be in partnerships with co-operative societies in those countries.
  • Credit Bank is seeking an additional Kshs 5.4 billion from an investment group. The bank is wooing Fountain Enterprises Programme (FEP) to buy to 70% of the bank via a private offer priced at Kshs 180 apiece and limited to members of the chama (investment club) which has a large following in the UK and US. (via Biz Daily)
  • CBK has rejects takeover bids by 7 suitors of collapsed Dubai Bank, as the proposed investors have not provided bona fides.
  • Equity Bank is completing the acquisition of 79% of Congo (DRC), the 7th largest bank – ProCredit Bank for w Africa. It has 170,000 customers and only about 4% of their 85 million citizens  have bank accounts.
  • The Mwalimu SACCO/Equatorial Commercial Bank combination is going to be called Spire Bank (via Mwirigi)
  • Fidelity Bank is set to receive an investment from Duet Private Equity who will pay Kshs 1.9 billion to buy into the bank (no shareholders are exiting).
  • I&M is set to acquire 100% of Giro bank in a deal in which the owners of Giro will get 5% of I&M. Also CDC is set to become the fourth largest owner of I&M after it agreed to fully buy out DEG and Proparco, who hold an 11%  stake. The Competition Authority of Kenya has authorized the acquisition  65% of Burbidge Capital by I&M.
  • Jamii Bora is looking to raise an additional Kshs 3.8 billion, comprising 800 million of debt and Kshs 3 billion from a strategic partner/investor.
  • Kenya Government: The National Bank of Kenya (NBK), Consolidated Bank and the Development Bank of Kenya will be consolidated into one or two institutions to make them stronger in coming months,  to make them stronger, Treasury secretary Henry Rotich has said.
  • The Kenya government also plans to create Biashara Bank form merging the Youth, Women’s & Uwezo enterprise funds) to cater for start-ups
  • Tanzania’s Bank M is set to acquire Kenya’s Oriental Commercial Bank, and be listed at the NSE. Bank M, a recent winner of best corporate bank in Tanzania has set up a holding company in Kenya (via Kenyanwalstreet)

Beauty & Pharma

  • The Competition Authority authorized the acquisition of 100% of Canon Chemicals by Godrej East Africa Holdings
  • Earlier the Competition Authority cleared the acquisition of the brands of Sigoria t/a Beuty Plus East Africa by Flame Tree Africa – this was part of the acquisition of the ‘Suzie Beauty’ brand and inventories for Kshs  45 million.

Food & Beverage

  • Centum made an offer to buy shares from some minority Almasi bottling shareholders.
  • The Competition Authority authorized the acquisition of Sab Miller by Anheuser-Busch Inbev.
  • Naked Pizza Kenya has been bought out by Pizza Hut (more here)
  • Coca-Cola Company  announced a new streamlined international structure. The company will form a Europe, Middle East and Africa (EMEA) Group, consisting of the business units that currently make up the Europe and the Eurasia and Africa Groups. And, in Africa, two business units will be reconfigured to more closely align operations with bottling operations on the continent, with the formation of a new South and East Africa business unit and a West Africa business unit. (Edit)

Finance, Law, & Insurance

  • Helios did a deal for Crown Agents key units marking the first time an African-managed fund acquired a UK financial institution.
  • Ringier Africa Deals group (ex-Rupu) acquired Nigerian online shopping platform DealDey
  • The Competition Authority authorized the acquisition of an additional 16% of AON Kenya Insurance Brokers Limited by AON UK Holdings  giving it a controlling interest of 56%.
  • The Competition Authority authorized the acquisition of 63% of First Assurance Company by First Assurance Holdings  on condition that the merged entity shall retain all 120 employees of First Assurance Company
  • Resolution Insurance was set to raise Kshs 2.5 billion in a series of transactions that will see new investors join private equity firm Leapfrog Investments in the list of the company’s shareholders (via Biz. Daily)
  • Two of the oldest Kenyan law firms, Daly & Figgis (1899) and Inamdar & Inamdar (1926) will now practice as Daly & Inamdar.
  • Plum LLP plans to buy a 23% of insurer British-American Investments(Britam) that had been seized by the government of Mauritius from a disgraced businessman in 2015. (Edit)

Logistics, Engineering, & Agri-Biz

  • Google agreed to buy a 12.5% stake in Africa’s largest wind project, Kenya’s Lake Turkana, from Danish wind turbine manufacturer Vestas Wind Systems A/S. The 310-megawatt Lake Turkana wind park, controlled by Lake Turkana Wind Power, is set to produce about 15% of Kenya’s electricity needs (via Marketwatch)
  • The Competition Authority authorized the acquisition  of 100% of  Schreurs Naivasha by Kongoni River Farm.
  • The  Competition Authority authorized the acquisition of 49% of, and or 100% preference shares in, Seruji Limited by QG African Infrastructure 1L.P.
  • The Competition Authority  authorized the acquisition of assets of Lima by Panafrican Equipment – (Biwott)
  • The Competition Authority authorized the acquisition of 51% Transmara Sugar by Sucriere Des Mascareignes
  • The Competition Authority  authorized the acquisition of the assets of Afro Plastics Kenya  by Ashut Engineers.
  • Finlays Horticulture Kenya  was granted approval by the Competition Authority to buy Skytrain Limited, which provides the essential service to cargo airlines at JKIA (via Biz. Daily)
  • Swiss logistics giant Panalpina completed the buyout of a majority stake in Nairobi-based air freight forwarder Airflo for an undisclosed amount. (via Biz. Daily)
  • Craft Silicon will launch the Little Drivers service starting with 2,000 drivers — formerly of Easy Taxi, which exited the Kenyan and African markets last month after a decision by one of its investors, American firm Goldman Sachs, to direct all its investments towards Uber. (via Biz. Daily)
  • A British engineering firm that designed the iconic Burj Al Arab hotel in Dubai has acquired a Kenyan company, making Nairobi its African headquarters for property, energy and infrastructure deals. Atkins will build on the strong regional market presence of Howard Humphreys East Africa to grow its consultancy business lines including design, engineering and project management. (via Biz. Daily)
  • TransCentury Group reached a settlement with its majority convertible bondholders, reducing the debt from $80M to $40M as the company has secured an equity injection of $20M from Kuramo Capital, bringing the outstanding bond debt to USD 20M. (Edit)

Real Estate & Supermarkets 

  • The Competition Authority  authorized the acquisition of 100% of Vipingo Estate  by Centum Investments.
  • The Competition Authority  authorized the  acquisition of a further 40% of Two Rivers Lifestyle Centre  by OMP Africa Investment Company (Old Mutual.) Also at Two Rivers,  Carrefour has signed a 7-year lease that  guarantees some exclusivity.
  • The  Competition Authority authorized the acquisition of  Yako Supermarket by  Nakumatt Holdings, on condition that the merged entity shall retain all two hundred and eighty three (283) employees of Yako Supermarkets.
  • Suppliers adopted Uchumi’s revival plan that included convert half of the debt owed to them into equity but Uchumi’s largest shareholder,  Jamii Bora Bank, said they were duped in investing in the chain two years ago.
  • Botswana supermarket chain Choppies finally succeeded in its quest to enter Kenya’s retail space through the acquisition of Ukwala

Telecommunications, Media & Publishing

  • The Competition Authority authorized the acquisition of 70% of Telkom Kenya  by Jamhuri Holdings (Helios)
  • Times Media Group paid a lot for half of the Radio Africa Group, but it mostly went to settle their debt that was $11 million (via #JKL #thismanpike)
  • Centum increased its stake in Longhorn to 60% in a recent rights issue (it was 31% before).
  • Bamba TV and Standard Group signed a Kshs 300 million partnership that will see KTN acquire a 50%  stake in Lancia Digital Broadcasting, the trademark owner of Bamba TV. (via The Star) (Edit)
  • Trace TV acquires African VOD Service Buni.Tv which is one of the 3 largest VOD services in Africa alongside Iroko TV and Nasper’s Showmax (Edit)
  • Longhorn Publishers is set to acquire 74% Law Africa Publishing for an undisclosed price. (Edit)

Other

  • The Competition Authority authorized the acquisition of 30% of KEG Holdings by Africa Bovine.
  •  The Competition Authority  authorized the acquisition of 51% of Universal Corporation  by Strides Pharma (Cyprus)
  • The Competition Authority of Kenya authorized the acquisition of shares in Stellar Investment Holdings by Catalyst OCL Investment LLC , pursuant to the provisions of a convertible debt instrument.
  • Marriott International have rebranded Protea Hotels to capitalize on the travel aspirations of Africa’s growing middle class and the increased presence of international hotel brands in Africa. The brand is now officially Protea Hotels by Marriott (Edit)
  • GardaWorld acquires KK Security: The international protective service firm had added KK Security to its global hetwork which now includes 18 African countries, up from 11 before. (Edit)

Rumours

  • Tigo to buy out of Airtel Kenya?
  • Gossip blog Ghafla Kenya gets acquired by Ringier (via Techweez)

Industry Stuff

  • An investment banker’s worst nightmare .. buyers in $ billon deals didn’t use financial advisers 26% of the time.
  • African private-equity deals shrink to lowest level in three years as funds reach record closes?!
  • Africa private equity exits reach a nine-year high?!
  • UK business aviation feels that a Britain split from the European Union would be a very bad thing.
  • The African Development Bank is putting up a fund with $5 billion, specifically to incubate ideas from young Africans.

$1 = Kshs 100

Interswitch in Kenya

Interswitch is a Nigeria-based, transaction switching and electronic payments processing company, with operations in several African countries. The company, founded in 2002, provides payment solutions for individuals and organizations, mainly around financial services to several private sector companies, as well as in the public sector (government revenue, health care etc.)

Interswitch was majority acquired by Helios Investment Partners for $96 million in 2011. Helios are best known in Kenya for their large investments in Equity Bank, Wananchi Online, and soon, at  Telkom Kenya, where they are in the process of buying out France’s Orange Telecom.

Interswitch itself entered Kenya by buying 85% of Paynet Holdings in 2014, which was best known for it’s Pesa Point network of ATM’s, which was launched in 2005,  and which grew to serve customers of over 100 institutions including several of the large and mid-size banks. At the time of the  Interswitch purchase in 2014, Paynet Services had 2013 revenue of Kshs. 320 million (~$3.7 million) and powered of 1,200 ATM’s and 1,300 bank agent locations in Kenya.

Interswitch also owns Verve International which is the largest card brand in Nigeria with almost 30 million customers. Interswitch launched the Verve card brand in Kenya last month, in a partnership with KCB, East Africa’s largest bank

Equity Bank 3.0: Agency Banking & Equitel 

A few days after Equity Bank released their Q3 results, the bank had another media briefing. CEO James Mwangi explained the stuff he had said earlier about the shareholding change, agency banking, superiority as a Telco and expansion plans for Africa.

Notes from the Live stream

Shareholding Change:

  • Helios have exited from the bank ahead of the end of the seven year life of the fund. It was a closed fund.
  • Equity listed in 2006 to discover  the price of the shares and on listing it was Kshs 50 per share  more than they had been offered
  • They chose Helios over 5 other investors. Helios had patient investors (CDC, IFC, Soros)
  •  Helios is an example of what private equity can do and the bank transformed from Kshs 2 billion to 65 billion in shareholder funds without having to do a rights issues, or issue shares and went from 20 billion to 400 billion of assets
  • Helios exit was not a buy back, but a sale to third parties including Norfund, Genesis, Investec, NSSF Kenya, NSSF Uganda and Blackrock – some of who paid a premium of 10% above the market in order to secure large blocks of shares
  • The sale has allowed local shareholders to take up more shares in the bank and reduce the foreign ownership from 49% to 42%
  • Helios netted about $500 million from the sale of there stake in Equity
  • Investors who missed out include China Construction Bank, China Development Bank, Temasek (singapore) and PIC (South Africa)

Agency Banking: 

is one of their most misunderstood and underrated products in which they outsource services /costs to third parties for a fee, and share prosperity with their customers (who become suppliers of Equity services)

  • Top agents are doing 300-400 transactions per day (one in Kitale is doing 500) and top agents earn Kshs 750,000 to 1 million per month
  • Going to add insurance, stockbroking – and transform 20,000 businesses. They want them to be profitable, so won’t register a flood of new agents (e.g. 100,000 who will reduce the pie)
  • In August, agents transacted Kshs 29 billion (2/3 is deposit, 1/3 is withdrawal) – agents have too much liquidity – that’s why Equity/Equitel money transfer is free  as it sweeps up excess cash at the agents
  • Hope to use agents to bring down their cost income ratio down to 32%

Equitel / Phone Banking: 

  • Equity is not a telco – it is a channel for banking service with value add for telco – so customers don’t have to carry two phones
  • Average sending amount is 2,000 – 3,000
  • Mwangi asked Kenyans to furiously take up this product as it solves two problems – that of too much cash at the Equity agents and customers solve their problem of  exhobitant money transfer costs. Equitel did 8 million transactions in August double the numbers down by agents
  • Using USSD, customers used to do 2 transactions per month. That is now to 19 transactions per month with Equitel, and they hope to go 120 per month when they add payments.
  • Kshs 4 billion has been disburse via Equitel . 1 million people have got these loans and the average is 4,000 or 5,000. They are going to increase the loan duration to 3 months, then 6, and will do loans of 3-5 years eventually.
  • Used to process 3,500 loans a day, but that’s now 12,000 loans per day via mobile. loans starts at 1 a.m. peak and are disburse by 5 a.m. before the branches open.
  • Credit applications takes 2 minutes to check with the credit reference, the national identity bureau and also come up with a score analysis.
  • You can send money to any telco, any bank account, any debit/credit card in the world
  • Next is bill presentation; you give your bank a list of recurring payments, and they will  check the bill for you and ask you to confirm payment for electricity, water, dust etc.
  • Cardless banking – no need to carry an ATM card.
  • Other products are virtualization of chamas (software that keeps meeting minutes, chama balances, contributions, reminders, and disburses member loans by phone ( requests done by secretary, approved by chairman, paid by treasurer etc. all by mobile phone)
  • Harambees (fund raisers are also virtualized:  You can see how much has been raised, who has donated a goat etc.
  • Everyone in Kenya can be an airtime reseller and earn a10% commission
  • Equity Life will have medial advice, agricultural advice (trying to map all soils in the country to better advise farmers on fertilizer), education (they have put curriculum from standard 4 to form 4 for kids to revise and do daily homework), financial literacy etc
  • It has free insurance for anyone who spends Kshs 250 per month

Equity briefingJohn Staley, the Director of Finance & Innovation, said Equitel was a free channel that enables them to do secure transactions that were not possible by USSD before and they will soon be rolling out a secure mobile app.

James Mwangi confirmed that a move by Safaricom to hike up the costs of Equitel to bank transfers had been shot down and such regulatory approval decisions will be made by third parties of payment companies and banks (including Equity).

Africa:

Finally Equity are about conclude their purchase of ProCredit Bank in DRC with most regulatory approvals received and others that they have applied for (agency, mobile) pending –  and one of their big take on’s will be to process payroll of all civil servants in the DRC.

16 November 2015