Celtel An African Success Story

Celtel: An African Success Story

Dr Mo Ibrahim Founder and Executive Chairman Celtel

IFC Private Equity Conference

Washington May 2005

Who

we are…

3

Dr Ibrahim IFC Private Equity Conference Washington May 2005

Celtel Summary

Celtel was formed and built by African people and raised over $400m

equity to invest over $800m in bringing communications to more than 6

million Africans.

Celtel has been acquired by MTC Kuwait for $3.4 billion in one of the

biggest corporate deals ever involving a company operating in Sub-

Saharan Africa.

This deal brings Gulf oil money to Africa and puts over $2 billion back

to the Development and private equity funds who were major Celtel

shareholders

4


Celtel History

MSI Cellular founded in 1998 as a spin off of MSI Plc which:

Was global leader in cellular network and software consultancy

Supported leading GSM operators in licence bids and operational activities

Created over $900 million value for shareholders

From the start :

Had: Did not have:

1. Serial entrepreneur 1. Home base operation

2. Industry knowledge 2. investment funds

3. Management

5


• Award of licences in

Zambia, Republic of the

Congo, Sierra Leone

• Sale of Indian interest

• Vodafone Egypt founding

shareholder

• Award of

licences in

Malawi,

Gabon,

Tchad and

DRC

• Award of

licences in

Burkina Faso

and Niger

• Increase of

stake in

Uganda

• Acquisition of 35%

stake and management

control of TTCL,

Tanzanian fixed-line

operator followed by

launch of mobile

operations

• Acquisition of 39% of

Mobitel, the first mobile

operator in Sudan

• Acquisition

of

LinkAfrica

• IPO preparation

• Relaunched brand

• MSICIH renamed

Celtel International

• Acquisition of 60%

of Kencell, Kenya

1998 1999 2000 2001 2002 2003 2004

Celtel growth and transformation

• From licence hunting entrepreneurial team to a $1 billion

revenue company ready for IPO in 7 years.

6


Celtel today

(a) As of end of 2003 (World Bank)

(b) As of end of 2004

(c) 2004 Pro-Forma for the acquisition of Kencell

250m Population

Under Licence (a)

6m Managed

Mobile Customers

4m Proportionate

Mobile Customers

US$748m 2004PF (c)

Proportionate Revenue

US$264m 2004PF(c)

Proportionate EBITDA

Chad

Burkina

Faso

Republic of the Congo

DRC Gabon Kenya

Malawi

Niger

Sierra

Leone

Sudan

Tanzania

Uganda

Zambia

Market Leader in 10 of 13 Markets

7


Celtel’s Vision

• „Making Life Better‟ is the overriding vision that drives us

• Everyone in the company contributes to making this true for all our

stakeholders

• We are driven by our commitment to achieve sustainable development of

telecommunications in Africa

‘Making Life Better’ ‘La Vie en Mieux’

8


Celtel’s Mission

• We are a telecommunications company

• We are Pan-African

• We want to be the most successful for our

Shareholders

Customers

Employees

Communities we work in

‘To be the most successful

Pan-African telecommunications company’

9


Investment challenges

• Biggest constraint on investment in Africa : the image…

• Unstable political environments

• Unpredictable economic performance

• HIV/Aids

• Corruption

• Penal taxation and regulation

• Outdated technology

10


What do investors want?

• Investors want Africa to have:

Stable political environment

Predictable economic performance

Educated workforce

Transparency and Rule of law

Sensible tax and regulatory regimes

Modern technology

• i.e. same requirements worldwide

11


Corruption ?

Celtel committed to do challenge corruption in Africa

Commitment: “ not a single dollar”

Celtel today is living proof that you can

do clean business successfully in Africa

12


Strong Corporate Governance

• We have a continued focus on implementing high corporate governance

standards

• We have a world-class and supportive investor base

• We have an experienced Board of Directors with people who have a deep

knowledge of the telecoms industry and the African environment

13


Board Members have included:

Dr. Mo Ibrahim Executive Chairman and Founder of Celtel and MSI Plc

Lord Prior Chairman of GEC until 1996;UK Cabinet Minister during Thatcher

Lord Cairns Ex Chairman of CDC/Actis

Salim Salim ex Secretary General of the OAU Prime Minister of Tanzania

Sir Alan Rudge President of Celtel and former Deputy Chief Executive BT

Sir Gerry Whent Founder of Vodafone

Jay Metcalfe Former Chief Executive of Millicom until 1997

Naushad Merali Chairman Sameer Group Kenya

Joseph Solan Represents IFC

Felda Hardymon Represents BVP and Harvard Business School Professor

Thomas Gibbian Represents Emerging Markets Partnership

Jonathan Bond Represents CDC Capital Partners

Tom Barry Represents Zephyr Asset Management

Ashley Dunster Represents Capital Group

14


World-Class supportive shareholders

Founder, Management and Employees

African Investors:

WordTel Africa, Zephyr Management

Standard Bank

Private equity:

Bessemer, Alba, Citigroup,

Capital International etc.

Intl Emerging Mkts Invt Funds:

Actis / CDC, DEG, FMO

AIG Infrastructure Fund, IFC

• Company has gained trust of world-

class investors including significant

stakes owned by

Africa-focused investment funds

Major development finance

institutions

Leading commercial private equity

groups

Key Shareholders

15


Strong Corporate Governance International Recognition

Winner of the 2004 IFC Client Leadership

Award from over 1,300 companies in their portfolio

Celtel is ‘a company that sets the gold standard for its peers anywhere in the world,

a company that is a role model for others, regardless of sector, region or country’

Peter Woicke IFC Executive VP October 2004

16


Meeting private equity needs

•Alignment of management and investors – all shareholders

•Invested in management ahead of crises

•Involvement – Board seats and observers

•Information – full monthly reporting

•Influence - esp. in financing, advising on IPO and sale

•Risk management

17


Risk Management

Negative image is still there; especially on TV

Business beginning to see Africa‟s fast growth

potential (positive articles in Wall Street Journal,

Businessweek and even The Economist)

But still worried about the risk…

So Celtel focuses on managing the risks

Ethics and values

Portfolio

Governance and transparency

Understand capital markets

Develop local people, build local businesses

Corporate social responsibility

18


Risk Mitigation

Diversified portfolio with minimal risk interdependency

Significant component of revenue is in hard currency

Successful track record in repatriating hard currency

Strong corporate ethics and corporate transparency

Premier shareholders, board members and management

Focus on core competence

Proven track record

19


(a) Pro-Forma for the acquisition of Kencell, percentages based on gross revenues

(b) Pro-Forma for the acquisition of Kencell, percentages based on total excluding holding, Infocom and Celpay

2004 Proportionate Revenue (a): US$748m 2004 Proportionate EBITDA( b): US$264m

Chad

3%

Malawi

3%

Tanzania

Mobile

3%

Niger

2% Uganda

2%

Sudan

23%

DRC

14%

Gabon

12% Kenya

10%

Rep.

of the

Congo

9%

Sierra Leone

6%

Zambia

5%

Link Africa

5%

B Faso

4%

Chad

4%

Tanzania

Mobile

2% Malawi

3%

Niger

3% TTCL

1%

Diversified Portfolio

Rep.

of the

Congo

9%

DRC

19%

Sudan

13%

Kenya

10%

Gabon

9% Link

Africa

9%

Sierra Leone

5%

Zambia

5%

B Faso

4%

TTCL

4%

20


Fundraising : equity

51.3

114.3

170.5

296.0

391.9

11.116.1

243.0

381.4

414.8

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

Mar

-98

Jun-

98

Sep-9

8

Dec

-98

Mar

-99

Jun-

99

Sep-9

9

Dec

-99

Mar

-00

Jun-

00

Sep-0

0

Dec

-00

Mar

-01

Jun-

01

Sep-0

1

Dec

-01

Mar

-02

Jun-

02

Sep-0

2

Dec

-02

Mar

-03

Jun-

03

Sep-0

3

Dec

-03

Mar

-04

Jun-

04

Sep-0

4

Dec

-04

Mar

-05

US

$ in

millio

ns

21


Fundraising : debt

Major problem

Always been difficult and expensive to raise debt.

Even for profitable, cashflow positive company

Little opportunity to raise debt in Africa

Holding company debt: equity ratio always <1:1

“Excessive” equity lowered return

22


Celtel achievements

13 mobile operations

Largest footprint of any operator across Africa

Over 250 million people in licensed countries (30% of all Africans)

Over 6 million customers

Revenue run rate of over $1 billion a year

Ebitda $250m in 2004; target $400m+ in 2005

Half the top management and over 98% of staff are Africans

Created Celtel as a major new brand built on the positive side of African

culture

23


24


Celtel Values

We are open, honest and transparent

We see the customer as our most important stakeholder

We respect and support each other and value teamwork

We do what we promise

We value achievement and success

We are progressive and culturally diverse

25


Celtel business philosophy

Built Celtel on a very strong set of principles and values:

• The objective of Celtel is to achieve sustainable development of

telecommunications businesses in Africa in an efficient and profitable,

responsible and ethical way

• Celtel is committed to the development of Africa by „Making Life Better‟

• Key value is integrity – Celtel demonstrates that it is possible to conduct a

business across sub-Saharan Africa that follows best business practice.

• Celtel adopts best practice for corporate governance and expects the

same from governments and partners

• We refuse to do business where transparency is inadequate

26


Inclusive capitalism

I am a strong believer in inclusive capitalism:

1. Share equity with management and staff to get best people

Over 50 new millionaires in Celtel

Sale bonus for all African staff

2. Include local equity partners

Wherever possible; must contribute and meet our standards

3. Develop local entrepreneurs

Celtel has over 120,000 points of sale in Africa

Mobile top up is a $15 billion business across Africa

which only started 5 years ago

27


Seeing opportunity

• Celtel was a pioneer in meeting Africa‟s need for Telecoms infrastructure:

• When Celtel started in 1998 there were only 2 million mobile phones in

Africa.

• Now Africa is the fastest growing region in the world for mobile phones.

Sub Sahara Africa grew 67% last year compared with 10% in W

Europe

Last year there were more new mobile phone customers in Africa than

in North America

• Today there are some 100 million

• But we have only just started: sub Sahara Africa still at 5% penetration

• All of Africa at 12% compared to nearly 90% in W Europe

28


Revenue and ebitda growth…

0

100

200

300

400

500

600

700

800

900

1000

De

c-99

Jun-0

0

De

c-00

Jun-0

1

De

c-01

Jun-0

2

De

c-02

Jun-0

3

De

c-03

Jun-0

4

De

c-04

Jun-0

5

De

c-05

29


…delivers success for all stakeholders

Success for shareholders

Success for employees

Success for governments

Success for customers

Success for development

30


Who has benefited from Celtel?

Shareholders $3.4 billion

Development Funds $ 1.1bn of which IFC and Actis get lions share

Private equity $ 900m

Founders and staff $ 1.4 bn

Average return on investment = 8.5 times

Governments

Tax and licence revenues

Customers

6m people now have phones

Africa

Development impact of mobile phones

Jobs: 3000 high quality jobs; some 30,000 indirect jobs

More than 120,000 distribution outlets

31


Mbonea Msuya, a 28-year old banana trader, uses his Celtel phone to find out the latest prices in Dar es Salaam, Tanzania’s capital, before buying fruit from farmers on the slopes of Mount Kilimanjaro more than 250 miles to the North. He bought phones for his four assistants , to keep the information flowing. “I’m making more money” Msuya says. “Before using the mobile phone I travelled by bus from one place to another to know the prices and get orders”

Businessweek 10 November 2004

Thank you

Dr Mo Ibrahim

Documents

Celtel An African Success Story