- Jan 30, 2008
Why Mo Ibrahim had to do it himself
Sudanese businessman Mo Ibrahim. Mo says he does not feel sad that he sold the "exciting adventure" that was Celtel to Kuwait's Zain. "Every now and then I think: Wow, it was wonderful, and now it's over. But I'm okay with that," he says.
By MO IBRAHIM email@example.com
Posted Friday, November 30 2012 at 02:00
As a native of Sudan who has spent most of my adult life in the West, I've always been aware of how ignorant Westerners can be about Africa. But every so often someone says something that manages to surprise me.
One such conversation took place in 1998. I was running MSI, a software and consulting company in the UK, and I regularly worked with the world's biggest telecom companies.
To me it was obvious that huge opportunities existed for those companies to develop mobile communications in Africa.
One day I pulled aside a senior telecom executive and urged him to apply for a license in Uganda, which was seeking assistance.
He said, "Mo, I thought you were smarter than that! You want me to go to my board and say I want to start a business in a country run by this crazy guy Idi Amin?" I was stunned. I said, "Idi Amin left Uganda years ago!"
At the time, I didn't consider myself an expert at sizing up business opportunities.
I'd spent my adult life first as an academic, then as the technical director for British Telecom's early foray into cellular communications, and ultimately running my own consulting company.
But even I could see that developing mobile communications in sub-Saharan Africa - where most people had never used a phone, let alone owned one - was an opportunity too big to pass up.
The huge gap between supply and demand wasn't the only attractive aspect of taking mobile phones to Africa.
Africa had no fixed-line phone networks, so mobile phones would face no competition. To me it was obvious that cellphones would be a huge success.
My clients refused to see it that way: Africa was too risky. So I decided I had to do it myself. I had no experience building this kind of company on my own. I knew I'd face hurdles - but I had no idea how significant they would be.
In 1998, when I decided to launch a project to explore setting up mobile communications in Africa (which later became the company Celtel), the consulting firm I was running had 800 employees.
Celtel started out with just five employees. Although the consulting firm provided our initial investment, I spent a significant amount of time raising capital: $16 million (about Sh1.3 billion) in the first year, to acquire licenses and begin building infrastructure, and ultimately more than $415 million (Sh32 billion) during our first five years.
The first challenge was to establish our credibility. We had great technical people, but we hadn't run our own network before.
So we had to convince the regulators and telecom ministries that we could deliver.
Fortunately, we had virtually no competitors, and I had managed to recruit an experienced board, which included Salim Ahmed Salim, a former prime minister of Tanzania.
One reason major telecom players were afraid of Africa was its reputation for corruption.
So we insisted on accepting only licenses we had won in an open bidding process; we would never accept them if they were offered under the table.
We focused first on a handful of countries that had inexpensive or free network licenses available, including Uganda, Malawi, the two Congos, Gabon and Sierra Leone. The pent-up demand was almost overwhelming; we couldn't move fast enough.
At first Celtel was a sideline for MSI. But it quickly became apparent that the challenge of building such an ambitious operation was enough to merit my focused attention.
So in 2000 I sold MSI to Marconi for more than $900 million (Sh76.5 billion), and over the next few years I put all my energy into building a cellular communications company that would defy the naysayers about Africa.
Each country where we set up operations offered unique challenges. Doing business in a place like the Democratic Republic of Congo was a nightmare because it had no good roads - and sometimes not even bad roads.
And there were political challenges. In Sierra Leone we were in a region at war. We had to make it clear that we were a neutral company with no allegiances.
When the capital fell to rebels, we had to pull our staff members out of the country.
They returned later with UK members of the UN peacekeeping mission, whom we provided with phones and service.
Because both sides in the war needed to communicate, no one sabotaged our towers. We quickly became the market leader in that country.
Cultural challenges were less of a problem than I had anticipated. When you start to meet with people at the village level, you find that Africans are very easygoing and hospitable.
We always had great relationships with local communities. Because we didn't deal in bribes, we looked for other ways to help the impoverished areas in which we were setting up operations.
We built schools and clinics where we could. We looked after our local employees.
We instituted management training and technical training - providing people who'd been denied an education with completely new skills.
By 2004, we had 5.2 million managed customers and operations in 13 countries, with revenue of $614 million (Sh52 billion) and a $147 million (Sh12 billion) net profit.
Celtel was a strong, rapidly growing business. But raising money may have been my biggest challenge.
We had to do round after round of fundraising just to keep the business afloat. Financial institutions simply didn't see Africa the way they saw India and other emerging market economies.
Around that time we sought a loan. The banks required us to offer the assets of the whole company as security - to obtain just a few million dollars at draconian rates and terms.
We eventually accepted the terms because we needed the loan, but clearly we had to find a better long-term source of capital.
So we decided to do an initial public offering on a reputable stock exchange, such as London's.
When word got out that we were considering an IPO, we received unsolicited offers to buy the whole company.
Ultimately, we agreed to one of those offers and sold Celtel for $3.4 billion (Sh2.8 trillion) to the Kuwait-based Mobile Telecommunications Company (now Zain).
Do I ever feel sad that such an exciting adventure ended so quickly for me? Well, I look at what we left behind, and it's very good.
We created a large company, but we created an even larger economy that grew up to support the business.
At the time of the sale, Celtel was operating in 13 African countries under licenses that covered more than a third of the continent's population.
We'd invested more than $750 million (Sh63 billion) in Africa and helped to bring the benefits of mobile communications to millions of its people.
Every now and then I think, "Wow, it was wonderful, and now it's over." But I'm OK with that.
(Mo Ibrahim, the founder of Celtel, is the chairman of Satya Capital and of the Mo Ibrahim Foundation, which focuses on the governance of African countries.)
Why Mo Ibrahim had to do it himself - DN2 - nation.co.ke