Altech moves into internet

Johannesburg - After fighting off government and keeping its licence, JSE-listed Allied Technologies (Altech) has acted on its victory and bought into the internet space as competition heats up.

The company on Wednesday announced it has bought internet service provider Lateral Technology Concepts, taking it one step closer to developing and operating its own communications network.

Altech, part of the Allied Electronics (Altron)/Venter family stable, is involved in the telecommunications, multi-media and information technology industries and owns brands like vehicle-tracker Netstar and Autopage Cellular.

Earlier this year the company won a court battle with Minister of Communications Ivy Matsepe-Casaburri. This enabled Altech to convert its existing licence to two new licences under the new Electronic Communications Act.

This would make it possible for the group's telecommunications subsidiary, Altech Autopage Cellular, to develop and operate its own telecommunications network without having to rely on operators like Telkom and Neotel for its infrastructure. It would also encourage competition.

"The changes in legislation have opened up the industry," said Vestact analyst Paul Theron. "Big players are likely to buy out smaller players as a way to increase their market share rather than growing organically. Smaller companies might team up as well."

In-house solutions

"We have been interested in purchasing an ISP for some time." said Altech CEO Craig Venter in a statement. "As a result of the changed regulatory landscape, moving into internet service provision is a natural extension of Altech's existing business.

"Through the strong distribution footprint in Altech and in particular Altech Autopage Cellular, which has approximately one million corporate and retail clients, we are in a position to rapidly scale Technology Concepts by introducing new internet services to these clients," he said.

Technology Concepts offers a full range of ISP products, services and solutions which are developed and managed in-house.

"Acquiring Technology Concepts allows Altech to obtain significant experience in ISP and data management. We will also have the ability to export the systems imbedded in Technology Concepts such as the billing platform to other geographies where Altech is present, like East Africa.

"This transaction forms part of an overall solution to bring data connectivity to the end customer via copper solutions, fibre and wireless network links," said Venter.

Altech is confident the acquisition will not only expand its services, but improve the company's bottom line.

"About 64% of Technology Concepts' business is annuity based and, although it is within a competitive market, it's showing high profit growth. The acquisition thus ensures a regular and consistent income stream for Altech which will positively affect our headline earnings per share," said Venter

Altech will use its cash reserves to fund the maximum purchase price of R45m. An amount of R7.5m will be paid initially.

The remaining R37.5m will be released to Technology Concepts shareholders in terms of an earn-out mechanism over two years, if after-tax profit targets for the years ending February 2010 and 2011 are achieved.

- Fin24.com