Millicom has signed a share purchase agreement to acquire an 85% stake in Zanzibar Telecom (Zantel) from Etisalat Group.
Under the terms of the agreement Millicom will pay the total cash consideration of $1 dollar and assume total debt obligations of $74 million. In addition Zantel will have up to $32 million in net current liabilities at closing. Millicom expects the EBITDA of Zantel to reach $25 million through a combination of bringing new products and services to the existing customer base and delivering greater efficiencies.
The agreement allows for an adjustment to the total consideration if that target is not reached by the end of 2019.
Millicom has arranged with an international bank, the provision of a $100 million five-year credit facility for Zantel.
The Government of Zanzibar will continue to own the remaining 15% of the shares in Zantel. Millicom is looking forward to working with the Government of Zanzibar as a partner and as a shareholder.
The transaction remains subject to regulatory approval by the Tanzanian Communications Regulatory Authority and the Fair Competition Commission.
Zantel reported gross revenues of $82 million and 1.7 million subscribers across Zanzibar and mainland Tanzania in 2014. It operates 2G and 3G services over 545 network sites, with 57MHz of spectrum and has ownership rights to undersea fibre optic cable capacity. Zantel has an approximate 5% share of the Tanzania mobile market, according to the company.
“Millicom intends to retain and continue to operate the Zantel brand, while delivering cash flow growth by leveraging technical and operational efficiencies,” said the company in a statement.