NEWS COMMENT:

Millicom thinks there is more money to be made from deregulation in Africa

subscriber | 18 May, 2010

Over the past three years Millicom, the mainly Africa based mobile operator, has become the most valuable part of the Swedish Kinnevik group of companies.

This represents an ironic historical twist as one of the last major actions by the groups deceased founder Jan Stenbeck was to get the heck out of Africa after he'd become tired of black empowerment, cheating and heavy losses in his South African media investments during the Nineties.

As late as two years ago the groups strategy was to dress up the bride and give her a way to the highest bidding suitor. Discussions with China Telecom and others fell through on the issue of price.

Millicom's success in Africa inspired other parts of the group, such as Viasat and television format subsidiaries to scout around and find opportunities on the continent. This was possible partly by piggybacking on Millicom's network. One of the ventures is a new television channel in Ghana. One of Jan Stenbeck's children has also set up a philantrophic arm, with a project in Tanzania.

The Kinnevik investments in Africa are that of a small- to medium sized player. The main asset, with potential to grow further in Africa, is Millicom. Unlike most other Western based IT- and telecom investors Millicom and its parent company have offloaded its investments in Asia and instead focused on Africa. The assets in Asia - Cambodia and Sri Lanka - were sold recently for $ 800 million. Instead Millicom is investing in Rwanda.

Millicom is a not a Serie A player in Africa and is not aiming at that. But the company's assets are becoming increasingly valuable through strategic management and growth. The Serie A teams, be it MTN, Vodaphone or Barthi, will sooner feel the need to put in an offer. Or another Indian- or Chinese player with deep pockets and large ambitions - will come in.

What Kinnevik has figured out is that the route taken by Millicom is a route well worth following by other subsidiaries. They are all benefitting from deregulation, privatisation and the fast growth of  African middle- and consumer classes.  In a way the sort of strategy that got Kinnevik going in its home market Sweden in the first place during the Eighties.

While most multinationals are entering South Africa and then takes on Africa, the Kinnevik way have been to go for deregulation and if that didn't work it would pack up and go. That's what Jan Stenbeck did in South Africa, when he first lost out on a television license and then was dragged through a fair amount of black empowerment mud before he furiously cut his losses after clocking up close to SEK 100 million in investments that all went down the drain.

Kinnevik has made it in Africa but there is no reason why the company in a reversed kind of way would re-enter South Africa. At least not for as long as deregulation combined with new technology opportunities continues to be a core component in the company's strategy.

A-scan's Publisher Christer L. Pettersson has followed the fate of Kinnevik in Africa over the past two decades.

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