Starcomms has recently faced severe operational and financial challenges.

Nov.1 (PREMIUMTIMES) — In the wake of several financial challenges, Starcomms Plc. on Wednesday, announced that it has reached an agreement with Capcom Limited to provide it with a capital investment of cash and assets independently valued at $210m.

Capcom, a special vehicle created for the purpose of making an investment into Starcomms and related transactions is comprised of a number of investors including – MBC, a private trust with a focus on investing in emerging markets; Pan African Capital through its asset management division, PAC Asset Management; and the family offices, Bridge house Capital and Oldonyo Laro Estates.

In return for its investment into Starcomms, Capcom will receive new Starcomms shares which will result in Capcom owning 90.5 per cent of Starcomms restructured share capital.

Starcomms has recently faced severe operational and financial challenges on account of the shifting competitive landscape in Nigeria’s telecommunications industry.

“The recent challenges have resulted in the Company operating with an unsustainable high level of debt and a stagnating operating performance. As a consequence, Starcomms faces a severe liquidity crisis and the Board of Directors have therefore considered options available to introduce new capital into the Company” Starcomms said.

The Board stated that after due consideration and in the best interest of all stakeholders, it made the decision to engage with Capcom to provide new capital and service current debt obligations.

Starcomms’ Interim CEO, Olusola Oladokun, said the proposal from Capcom will enable Starcomms to reduce its high level of borrowings and improve its low liquidity position.

“Given the significant challenges the business has faced over the last two years, Capcom’s investment will facilitate a strategic turnaround, improve the competitive position in the market and place the Company on a growth path for the future,” he said.

With this investment into Starcomms, Capcom says it “aims to create a national Broadband Internet champion capable of significantly contributing to the government’s ambition to overcome the digital divide between Nigeria as an emerging market and other developed markets internationally”.

The transaction

The proposed transaction is expected to create a leading CDMA operator in Nigeria and represent a fundamental step as part of the consolidation move in the Nigerian telecoms industry.

Capcom will provide $98 million in cash to finance the integration of these assets, to meet on-going short-term losses in the business and to deliver the combined Company’s new business plan.

As part of the overall transaction with Capcom, both Helios Investment Partners and AMCON will acquire equity stakes in Starcomms derived from the Capcom shareholding on completion.

The transaction will be implemented through a scheme of arrangement which will reorganise the current share capital and a subsequent Private Placement to Capcom.

The transaction will also be subject to Court sanction and regulatory approvals, including approval from the Securities and Exchange Commission and The Nigerian Stock Exchange.

The Company’s Board of Directors believe that proposed transaction represents the best option available to Starcomms to effect a strategic turnaround, improve the Company’s financial position and retain value for its stakeholders.

The phenomenal growth of the mobile operators in Nigeria which has seen them dominate the telecoms industry has been taking its toll on Code Division Multiple Access, CDMA, operators and hitting them really hard in the face of a thriving mobile telecoms market.

These difficulty, earlier in the year, pushed three major CDMA’s, Starcomms, Multilinks and MTS to consider seeking approval from the Nigerian Stock Exchange to merge.

Rueben Muoka, Head, Media and Public Relations, Nigerian Communications Commission, NCC, said the telecoms company was in the best position to speak on the investment development, adding that the regulatory body was not in a position to speak on such investments from another company.

Shareholders fate

The shareholders of the firm are not left out in the unfolding development.

In the light of the above, the Board of Directors unanimously decided to recommend the proposed transaction with Capcom to Starcomms shareholders.

The agreement is subject to Starcomms shareholders approving the proposed Scheme of Arrangement (the “Scheme”) pursuant to Section 539 of the Companies and Allied Matters Act, 2004 (CAMA) which will be effected to reorganise Starcomms’ share capital as well as the Private Placement of new shares to Capcom.

As part of the overall transaction, existing shareholders will be offered the opportunity to make additional investments in Starcomms via a 1:1 Rights Issue upon the same conditions at which Capcom is receiving its share allocation. The Rights Issue will be launched subsequent to the closure of the Private Placement.

“Starcomms’ shareholders will have the opportunity to vote in favour of the resolutions to be proposed at the Court Ordered Meeting and the subsequent AGM of the Company to be scheduled”.

The Company says it will announce the date for the shareholders meeting in due course.