CAPCOM to Invest $210 million In Starcomms

Starcomms Plc, one of Nigeria’s leading CDMA operators has announced that it has reached an agreement with CAPCOM Limited to provide it with a capital investment of cash and assets independently valued at $210 million.

Founded by MBC, CAPCOM is 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. It has attracted a group of family offices and funds committed to investing in the Nigerian telecommunications industry and participating in the development of the sector. 

It is backed by a number of African and emerging market funds including Pan-African Capital’s asset management division (PAC Asset Management) and two private family offices with long experience of investing in Africa, Bridgehouse Capital and OldonyoLaro Estates.

A statement made available to onlinerommy.blogspot.com said that with this investment, CAPCOM aims to create a national Broadband Internet champion capable of significantly contributing to the government’s ambition to overcome the digital divide between Nigeria as an emerging market and other developed markets internationally.

The statement reads in part: “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. These include the spectrum licence of MTS and the CDMA mobile telecoms business of Multi-Links.

“In addition to facilitating the CDMA consolidation, 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, Capcom will receive new Starcomms shares which will result in CAPCOM owning 90.5% 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% of CAPCOM’s equity following CAPCOM’s investment) derived

from CAPCOM’s shareholding on completion.

The statement added 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 capable 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.”

Starcomms has recently faced severe operational and financial challenges on account of the shifting competitive landscape in Nigeria’s telecommunications industry. The recent challenges have resulted in the Company operating with an unsustainably high level of debt and a stagnating operating performance. As a consequence, Starcomms faces a severe liquidity crisis and the Board of Directors has therefore, considered options available to introduce new capital into the Company.

The statement noted that the Board decided that in the best interest of all stakeholders, it should engage with CAPCOM to provide new capital, service current debt obligations and position Starcomms for future growth.

“After due consideration, an agreement has been reached with CAPCOM to provide the significant capital required to place the Company on a solid platform for future growth and expansion while retaining as much value for current stakeholders as possible.”

It further added that critically, the proposal from CAPCOM includes the introduction of certain assets that are central to a strategic turnaround of Starcomms, adding that the transaction will be implemented through a Scheme of Arrangement which will reorganise the current share capital and a subsequent Private Placement to CAPCOM.

“In the light of the above, the Board of Directors has unanimously decided to recommend the proposed Transaction with CAPCOM to Starcomms shareholders, the statement added.

The agreement however, is subject to Starcomms’ shareholders approving the proposed Scheme of Arrangement 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, 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.

The statement added that 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 said to have been advised on the Transaction by CanaccordGenuity Hawkpoint and Stanbic IBTC.

There were widespread speculations in the Nigerian media a couple of weeks ago that three Nigerian CDMA operators were in merger talks to form a new company to be known as CAPCOM. The operators include Starcomms, Multilinks and MTS First Wireless.

A director in the Nigerian Communications Commission, Lolia Emakpore had in Dubai at an international telecommunications conference hinted Reuters that the three operators were seeking approval to merge. “The discussions are going on and are not concluded yet. It’s purely a commercial thing between the companies. We are looking at them coming together and becoming a bigger CDMA provider,” she had said.