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Wednesday, February 1, 2023

Equinix Acquires Loss Making MainOne for $320m as it Expands into Africa

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Equinix announced yesterday that it is acquiring MainOne, a loss making West African data center and connectivity solutions provider with a presence in Nigeria, Ghana and the Ivory Coast, for $320 million.

The acquisition comes in at 5 times 2020 sales according to MoneyCentral calculations and is a 500% upside to recent equity fair value of MainOne’s put at $54 million.

MainOne Cable Co Ltd., reported its third annual loss in a row in 2020, a signal that increased competition and an economic slowdown in its largest market Nigeria, is crimping its undersea cable business.

The company which operates an undersea cable connecting West Africa to Europe, reported a narrower loss after tax of $88,000 (N36.52 million) in 2020, after reported losses of $7 million (N2.7 billion) in the 2019 financial year.

The 2019 performance follows a loss of $7.26 million (N2.8 billion) in 2018, according to a snapshot of the firms financials seen by MoneyCentral.

MainOne’s revenues rose to $61.35 million in 2020, after falling by 25 percent to $43.9 million in 2019, compared to $58.68 million in 2018.

The acquisition is expected to close Q1 of 2022, subject to the “satisfaction of customary closing conditions including the requisite regulatory approvals.”

Equinix’s acquisition of MainOne follows a series of moves the global digital infrastructure player made last year when it expanded to India through the acquisition of GPX India for $161 million and acquired 13 data centers from Bell Canada for $780 million.

In a statement, Equinix acknowledged that acquiring MainOne is the first step in its long-term strategy to become an African carrier neutral digital infrastructure company.

“With more than 200 million people, Nigeria is Africa’s largest economy and, along with Ghana, has become an established data center hub. This makes the acquisition a pivotal entry point for Equinix into the continent,” the company said in the statement.

MainOne, which has a 500-person team, said its facilities generate approximately $60 million annualized revenue with a purchase multiple of approximately 14x EBITDA.

Upon closing, these facilities will add more than 64,000 gross square feet of space to Equinix, with 570,000 square feet of land for future expansions.

Globally, Equinix has 237 data centers across 27 countries. It also provides data center and interconnection services for over 10,000 of the world’s leading businesses, including more than 50% of Fortune 500 companies.

“The acquisition of MainOne will represent a critical point of entry for Platform Equinix into the expansive and rapidly growing African market. MainOne’s leading interconnection position and experienced management team represent critical assets in our aspirations to be the leading neutral provider of digital infrastructure in Africa,” said Charles Meyers, the president and CEO of Equinix in a statement.

“MainOne’s infrastructure, customer relationships, partner ecosystem and operating capability will extend the reach of Platform Equinix and bolster opportunities for customers in Africa and throughout the world.”

MainOne CEO Funke Opeke and the company’s management team will still continue to serve in their respective roles after the acquisition is finalized.

MainOne and other undersea cable operators such as MTN and Globacom are struggling with a slowing Nigerian economy, huge finance costs related to constructing the cables and increased competition from the likes of tech giants Facebook and Google.

Facebook announced in May 2020 that it was in partnership with some of the world’s largest telecom carriers including MTN Group Ltd., Telecom Egypt Co. and China Mobile Ltd., to build a $1 billion giant sub-sea cable to help bring more reliable and faster internet across Africa.

The 37,000-kilometer (23,000 miles) long cable — dubbed 2Africa — will connect Europe to the Middle East and 16 African countries. 2Africa is expected to come into operation by 2024 and will deliver more than the combined capacity of all sub-sea cables serving Africa, according to the statement.

Google announced its own sub-sea cable dubbed Equiano , which will connect Europe to Africa, using a route down the West African coast.

MainOne which opened a $25 million data center in Nigeria in 2014 may also be burdened by high finance costs as it had signed a $100 million loan facility with a consortium of banks including Standard Chartered Plc, First Bank of Nigeria Plc, and FCMB Group Plc to expand its network.

While demand for data and internet services continue to grow in Nigeria, there has been complaints about cost of data and poor connectivity.

Last year two undersea cables to the continent’s western coast were damaged leading to spotty internet service for customers.

MTN Group Ltd., apologized to customers in Nigeria and Ivory Coast for slow Internet speeds and difficulties in accessing data services in January. The company, in newspaper advertisements and via Twitter, said the problem was beyond its control.

MainOne’s current cable system is a 7,000km submarine cable with landing stations in Nigeria, Ghana and Portugal.

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