Pan-African service provider makes new acquisition

Gateway Communications, a leading provider of pan-African voice and data connectivity services, has agreed to acquire GS Telecom, provider of data connectivity services to corporate customers and telecommunications operators in Africa. The transaction was valued at approximately US$37.5 million and is to be financed through a combination of cash and funds from a newly issued bond. The transaction is expected to complete mid-May subject to certain conditions.

GS Telecom provides services in 27 African countries, with a major presence in Nigeria, the fastest growing communications market in Africa over the last five years.

The transaction would strengthen Gateway's position as the largest provider of voice and data connectivity services in sub-Saharan Africa, boosting Gateway's customer base with an additional 200 customers to over 1,200 customers in over 37 countries in Africa (Gateway's current network includes 30 African countries). The acquisition would bolster Gateway's presence in the rapidly growing business communications market and provide access to local infrastructure and support capability.

The transaction will also increase Gateway's geographic footprint and provide greater access to the rapidly growing Nigerian market. The enlarged business will benefit from network economies of scale with access to the largest private satellite footprint on the continent consisting of 25 transponders of capacity and to the SAT-3 undersea cable.

Founded in 1994, GS Telecom provides a broad range of secure network services and turn-key communications systems, including design, implementation and management to predominantly multinational companies in the energy, mining, consumer products, logistics, banking and telecommunications sectors. Major customers include Total, Shell, ExxonMobil, Coca-Cola, Citi, Standard Chartered Bank, MTN and Celtel. GS Telecom has 216 employees mainly in West Africa with 150 based in Nigeria.
The combined proforma revenues for the year ended 31 December 2006 for Gateway and GS Telecom were US$180.0 million and EBITDA was US$28.3 million.

Says Julian McIntyre, president of Gateway Communications: “This is a substantial acquisition which marks a further step in our strategy to consolidate our leading position in the rapidly growing African communications market. We are committed to improving the value proposition that we can offer to our customers, and the customers of GS Telecom, through providing a broader service range, greater geographic coverage and excellent local and international support capabilities. We look forward to working with the GS Telecom management team and staff to grow the enlarged Group.”

In his turn, Steve Chapman, president and CEO of GS Telecom said that the two companies are what he called an “excellent match”:

“Gateway is a leader in the carrier market while GS Telecom is a leader in the business communications market. Gateway has a major international presence, while GS Telecom has strong local support. We have highly complementary services and geographic coverage and our combined customer base will include the major businesses and mobile operators in Africa,” he said.