MTN’s Afrihost buy shows consolidation trend

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The takeover of internet provider Afrihost by cellular operator MTN is further confirmation that major players in the telecommunications sector are moving towards consolidating the market, analysts say.

In a statement on Monday, MTN said it had agreed to acquire a stake of more than 50 percent in Afrihost in a deal that was subject to approval from competition authorities.

According to MTN, the deal would add scale to its online information and communication technology (ICT) service offering, which was focused on the consumer and small business market.

It would “leverage off Afrihost’s strong customer service, value proposition and agility, thereby boosting MTN’s presence in the… corporate, consumer and connected home segments”, it said.

Afrihost is one of the top hosting and internet service providers in South Africa, according to industry insiders.

Joanita Roos, a senior industry analyst for the ICT business unit at Frost & Sullivan Africa, said the deal was not surprising because the two companies had joined forces as early as 2012.

Roos suggested that the takeover would enable MTN to leverage Afrihost’s competitive pricing and value proposition, expanding its enterprise broadband offerings and services to the small and medium-sized enterprise market.

She said the deal was further confirmation of consolidation, citing Vodacom’s pursuit of Neotel and the recent Telkom and Business Connexion deal. Both are subject to approval by the competition authorities.

Cell C has said it would oppose the Vodacom takeover of Neotel because it might lessen competition in the market.

Vinnie Santu, Cell C’s media liaison officer, said in an interview recently that entrenching the dominance of an already dominant player would not be in the interests of the industry, the consumer or the wider South African economy.

In addition to the slew of chess-like strategic moves by the major telecoms companies, MTN has continued to expand its integrated ICT business and has partnered with PriceCheck to launch a co-branded mobile application.

According to Roos, this partnership with PriceCheck highlights MTN’s movement into the digital space.

Also, in addition to acquiring Neotel, Vodacom is in talks with international digital music service provider Spotify, Bloomberg reported yesterday.

“Vodacom plans to offer its wireless customers subscriptions that include a limited amount of free data to access Spotify’s music library. An agreement with the Johannesburg-based carrier would let Spotify enter Africa after starting in more than 56 countries since it was founded in Sweden in 2006,” read the report.

According to Roos, what this means is that the telecoms market is changing rapidly and MTN’s acquisition of Afrihost and partnership with PriceCheck will enable MTN to better serve its enterprise and consumer markets.

“The expansion of its broadband offerings and entering the m-commerce market further enables MTN to provide targeted and integrated service offerings to meet tailored customer requirements,” Roos said.


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