INTRODUCTION
Following the notification by Dialog Axiata PLC (“Dialog”) to the Colombo Stock Exchange today, we are pleased to announce that Dialog Broadband Networks (Private) Limited (“DBN”), a wholly owned subsidiary of Dialog which in turn is a 84.97% subsidiary of Axiata had on 14 December 2011 entered into a Share Purchase Agreement (“SPA”) with the following shareholders of Suntel Ltd (“Suntel Shareholders”) for the acquisition of the entire Ordinary shares in issue (“Purchased Shares”) in Suntel (“Acquisition of Suntel”):-
- Overseas Telecom AB;
- Metrocorp (Pvt) Ltd.;
- Telecom Venture Group Ltd.;
- International Finance Corporation, a member of the World Bank Group;
- National Development Bank PLC;
- C Tech Investments (Pvt) Ltd.; and
- Kelmarsh Investments Ltd.
INFORMATION ON THE COMPANIES
Dialog
Dialog was incorporated in August 1993 and commenced operations in 1995. The stated capital of Dialog is LKR 29,306,113,435/-. Dialog, listed on the Colombo Stock Exchange, is the largest mobile telecommunications service provider in Sri Lanka supporting over 7 million subscribers and operating 2.5G and 3/3.5G mobile communications networks supporting the very latest in multimedia and mobile internet services. Dialog has the distinction of being the first 3G operator in South Asia to commence commercial operations. Its local coverage spans all provinces of Sri Lanka, while international roaming is provided in over 200 destinations. Dialog and its subsidiaries DBN and Dialog Television (Private) Limited, constitute the Dialog Group, Sri Lanka’s premier quad-play connectivity provider. DBN is a leading provider of fixed telecommunications, broadband and transmission infrastructure provider in Sri Lanka. Dialog Television is the country’s market leading DTH PayTV provider.
DBN
DBN, incorporated in 1993, became a member of the Dialog Group in 2006. Commencing operations as a Data Communications and Transmission/Tower Infrastructure provider at its incorporation, DBN entered the fixed telecommunications sector in 2006 and has since consolidated a robust and rapidly growing position in the sector based on its portfolio of CDMA WLL and WiMAX 16D BWA and Fibre Optic based fixed telecommunications, broadband and transmission infrastructure services. DBN has a stated capital of LKR 5,314,182,030/- and since becoming a member of the Dialog Group in 2006, has invested LKR 11.8 billion towards the expansion of its fixed telecommunications and broadband infrastructure with a particular focus on the development of its Optical Fibre Network.
Suntel
Suntel is a leading fixed telecommunications provider in Sri Lanka. The company commandeers a premium position in Sri Lanka’s fixed telecommunications sector and is ranked second in the sector in terms of fixed telecommunications business and revenue market share. Suntel’s fixed telecommunications infrastructure is based on and all digital network delivering fixed voice, broadband and data communication services using CDMA, WiMAX and other fixed wireless access technologies.
SALIENT TERMS OF THE SPA
Under the SPA, DBN is to acquire the Purchased Shares from the Shareholders at an enterprise value in the range of USD33.9 million and USD34.9 million, corresponding to a Valuation Multiple of 3.0x to 3.1x of the EBITDA of Suntel for financial year ended 31 December 2010 and determined by the outcome of confirmatory business valuation and due diligence during the period leading up to the completion of the transaction.
The SPA is subject to conditions precedent which includes regulatory approvals. The SPA stipulates the fulfillment of the conditions precedent within a maximum period of six months from the date of the SPA.
Upon fulfillment of the SPA, the operations of both DBN and Suntel will be consolidated into a ‘merged entity’ providing advanced fixed line and broadband services.
RATIONALE FOR THE ACQUISITION OF SUNTEL
The Acquisition of Suntel by Dialog’s fixed line subsidiary DBN, provides the Dialog Axiata Group with a much enhanced leverage and footprint in the fixed telecommunications market space in Sri Lanka. The acquisition also provides an avenue for the Dialog Group to benefit from the integration with Suntel’s best in class fixed line operations framework.
SOURCES OF FUNDS
The Acquisition of Suntel will be undertaken wholly in cash which will be funded through internally generated funds.
FINANCIAL EFFECTS
The Acquisition of Suntel does not have any effect on the issued and paid-up share capital of Axiata and is not expected to have any material effect on the earnings, gearings and net assets of the Axiata Group for the financial year ending 31 December 2011.
APPROVALS OF SHAREHOLDERS AND AUTHORITIES
The Acquisition of Suntel is not subject to the approval of the shareholders of Axiata.
DIRECTORS’ AND MAJOR/SUBSTANTIAL SHAREHOLDERS’ INTEREST
None of the directors and major shareholders of Axiata and/or persons connected to them have any interest direct and/or indirect in the Acquisition of Suntel.
This announcement is dated 15 December 2011.
