Millicom is acquiring an 85% stake in Zanzibar Telecom (Zantel) from Etisalat.
As a strong player in many emerging markets and Africa in particular, the operator has described its purchase as “a natural fit for Millicom’s strategy”. The government of Zanzibar holds the remaining 15%.
While it is paying just $1 to purchase Zantel, Millicom will assu,e $74 million of debt obligations, along with a potential $32 million net current liabilities once the deal is finalised. Zantel has around 1.7 million subscribers and its gross revenue in 2014 was $82 million.
The buy is a strategic move for Millicom in Tanzania. The operator’s Tigo business is the market’s third biggest player with 8.7 million connections, but adding Zantel’s subscribers would see it overtake current number two Bharti Airtel. This would put it in a strong position to compete with market leader Vodacom.
Aligning Zantel and Tigo will also deliver technical synergies across roaming and procurement. Millicom has stated that it will continue to operate under the Zantel brand “while delivering cash flow growth by leveraging technical and operational efficiencies”.
Millicom is aiming to increase Zantel’s EBITDA to $25 million through “a combination of bringing new products and services to the existing customer base and delivering greater efficiencies.” If this endeavour does not succeed by the end of 2019, the agreement allows for the price to be wound down.