I BUILT CELTEL WHEN NO INVESTOR BELIEVED AFRICA WAS A LUCRATIVE PLACE FOR TELECOMS
Posted on
Nov 13, 2012
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Mo Ibrahim
As a native of Sudan who has spent most of my
adult life in the West, I’ve always been aware of how ignorant
Westerners can be about Africa. But every so often someone says
something that manages to surprise me.
One such conversation took place in 1998. I was
running MSI, a software and consulting company in the UK, and I
regularly worked with the world’s biggest telecom companies. To me it
was obvious that huge opportunities existed for those companies to
develop mobile communications in Africa.
One day I pulled aside a senior telecom executive
and urged him to apply for a licence in Uganda, which was seeking
assistance. He said, “Mo, I thought you were smarter than that! You want
me to go to my board and say I want to start a business in a country
run by this crazy guy Idi Amin?” I was stunned. I said, “Idi Amin left
Uganda years ago!”
No expert
I didn’t consider myself an expert at sizing up
business opportunities. I’d spent my adult life first as an academic,
then as the technical director for British Telecom’s early foray into
cellular communications, and ultimately running my own consulting
company. But even I could see that developing mobile communications in
sub-Saharan Africa was an opportunity too big to pass up.
Africa had no fixed-line phone networks, so mobile
phones would face no competition. To me it was obvious that cellphones
would be a huge success.
My clients refused to see it that way: Africa was
too risky. So I decided I had to do it. I had no experience building
this kind of company on my own. I knew I’d face hurdles
Celtel started out in 1998 with just five
employees. Although the consulting firm provided our initial investment,
I spent a significant amount of time raising capital: $16 million in
the first year, to acquire licences and begin building infrastructure,
and ultimately more than $415 million during our first five years.
The first challenge was to establish our
credibility. We had to convince the regulators and telecom ministries
that we could deliver. Fortunately, we had virtually no competitors, and
I had managed to recruit an experienced board, which included Salim
Ahmed Salim, a former prime minister of Tanzania.
One reason major telecom players were afraid of
Africa was its reputation for corruption. So we insisted on accepting
only licences we had won in an open bidding process.
We focused first on a handful of countries that
had inexpensive or free network licences available, including Uganda,
Malawi, the two Congos, Gabon and Sierra Leone.
At first Celtel was a sideline for MSI. But it
quickly became apparent that the challenge of building such an
ambitious operation was enough to merit my focused attention. So in
2000, I sold MSI to Marconi for more than $900 million, and put all my
energy into building a cellular communications company that would defy
the naysayers about Africa.
Each country where we set up operations offered
unique challenges. Doing business in a place like the Democratic
Republic of Congo was a nightmare because it had no good roads — and
sometimes not even bad roads.
There were political challenges. In Sierra Leone
we were in a region at war. We had to make it clear that we were a
neutral company with no allegiances. When the capital fell to rebels, we
had to pull our staff members out of the country.
They returned later with UK members of the UN
peacekeeping mission, whom we provided with phones and service. Because
both sides in the war needed to communicate, no one sabotaged our
towers
We always had great relationships with local communities.
Because we didn’t deal in bribes, we looked for other ways to help the
impoverished areas in which we were setting up operations. We built
schools and clinics where we could. We looked after our local employees.
We instituted management training and technical training – providing
people who’d been denied an education with completely new skills.
Finding the money
By 2004, we had 5.2 million managed customers and
operations in 13 countries, with revenue of $614 million and a $147
million net profit. Celtel was a strong, rapidly growing business. But
raising money may have been my biggest challenge. Financial institutions
simply didn’t see Africa the way they saw India and other emerging
market economies.
Around that time we sought a loan. The banks
required us to offer the assets of the whole company as security — to
obtain just a few million dollars at draconian rates and terms. We
eventually accepted the terms because we needed the loan, but clearly we
had to find a better long-term source of capital.
We decided to do an initial public offering on a
reputable stock exchange, such as London’s. When word got out, we
received unsolicited offers to buy the whole company. We sold Celtel for
$3.4 billion to the Kuwait-based Mobile Telecommunications Company (now
Zain).
At the time of the sale, Celtel was operating in
13 African countries under licences that covered more than a third of
the continent’s population. We’d invested more than $750 million in
Africa and helped to bring the benefits of mobile communications to
millions of its people.
Every now and then I think, “Wow, it was wonderful, and now it’s over.” But I’m ok with that.
Mo Ibrahim is the chairman of Satya Capital
and of the Mo Ibrahim Foundation, which focuses on the governance of
African countries.
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