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Press release

CDC invests a further US$40m in a pan-African telecoms business that continues to buck the trend

09 September 2001
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CDC Capital Partners, a leading risk capital investor in emerging markets, today announced an investment of US$40m to assist the continued expansion of MSI Cellular (MSI), Africa’s second biggest GSM operator.

While the business models of many telecoms companies have been undergoing significant revisions in recent months, MSI has been bucking the trend, rapidly extending its operations throughout the African continent, and enjoying continued revenue growth in the process. It has won the licences in, and built the networks for, no fewer than 12 countries, with a minority stake in operators in two further countries.

CDC Capital Partners has been working closely with MSI since initially investing US$22.5m in 1998, adding a further US$25m in June 2000. This latest investment of US$40m, allied to CDC’s specialist experience in the telecoms sector and in emerging markets generally, will assist MSI’s continued expansion, and also the consolidation of the African telecoms environment.

"We are delighted to be so closely involved with MSI." said Adrian Robinson, director in charge of CDC's telecoms team. "As with all our investments, CDC's partnership with MSI is not just financial, but also the size of our investment is an indication of the company's great potential to be the leading pan-African GSM operator. MSI's successful implementation of a low cost, high growth business model has been the key to it gaining critical mass in the continent."

CDC’s US$40m is the anchor investment in a US$120m financing package, put together alongside other major private equity houses, such as CVC Capital Partners and Blakeney Management. The package is expected to enable MSI to be a self-funding operation within a year.

MSI has so far attracted over 500,000 customers in Africa – ten times the number it had just 18 months ago. It shares in a further 1.2m customers via its stake in the Click GSM network in Egypt.

MSI’s impressive growth, and its compelling prospects for the future, according to Terry Rhodes, deputy Chief Executive of MSI “…are largely based on Africa’s massive unfulfilled appetite for communications. One in eight of the world’s population lives in Africa, yet it has only one in 50 of the world’s fixed line telephones. Wireless can meet this demand quickly and cost-effectively, and provide attractive returns. Africa is the last growth market for GSM: in some countries, like Gabon, we are seeing penetration levels above 10% and growing rapidly.”

Commenting on CDC’s continued involvement, Rhodes said: “MSI is very pleased that CDC has again invested in the new capital round. They negotiate as hard as anybody; just like any investor, they demand a watertight business plan and concrete implementation strategy.”

“There are few better examples of CDC Capital Partners’ investment strategy in action than MSI Cellular,” Robinson adds; “Our investment return expectations are high, and we are confident that MSI can meet this challenge.”

The company’s commercial success means that it can also make a major, sustainable contribution to the development of some of the world’s poorest countries. Its mobile communications effectively leapfrog Africa’s often limited fixed networks in terms of reach, efficiency, cost and flexibility.

With social responsibility yet to become a significant theme in private equity investment, MSI has consistently met CDC’s standards in this respect. CDC’s business principles, which are embedded in all of its investment processes, involve the regular monitoring of any potential environmental, health or social issues. For example, MSI is producing for CDC an environmental and social report demonstrating its compliance with IFC/World Bank guidelines.

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