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CMC Networks, Carlyle Group strike deal to bolster Africa's connectivity

CMC Networks, Carlyle Group strike deal to bolster Africa's connectivity

The R1.4 billion deal between Pan-African managed connectivity solution provider CMC Networks and listed alternative asset manager The Carlyle Group has been completed.

The transaction, which gives the Carlyle Group a majority shareholding, was first announced in November 2016 with executives from both companies saying the partnership will give impetus to the rollout of enterprise connectivity product and expertise on the continent.

In a statement issued by the companies last year, it was mentioned that Investec Equity Partners, represented by Richard Tunstall on CMC's board, will sell its stake in the company, and the founder and management team will invest alongside Carlyle.

CMC Networks says its footprint covers 70 countries in Africa and the Middle East, and there are plans to further extend into Asia and South America.

Grant Walker, founder and CEO of CMC Networks, says the company expects a flurry of activity on investments, particularly those that have been on the backburner and the immediate focus is to ensure sufficient resources in place to guarantee zero impact on business.

Walker explains that there are several tiers of value to the broader wholesale connectivity market as a result of the deal.

One advantage is that CMC Networks can leverage the Carlyle Group's established base and deepen its existing relationships with enterprise carriers on the continent.

CMC Networks will also position the partnership to support those entities wanting to invest in Africa, but are concerned about reliable connectivity and the logistic challenges of doing business in certain regions.

The Carlyle Group has US$170 billion in equity investments says Walker and this gives them a viable channel for equity investment into Africa, increasing the likelihood of spin-off benefits including expansion and job creation.

Tier 1 ISPs

Another focus for CMC Networks is support African carriers onto the network and enable them to expand their own respective regional footprints into the rest of the world.

CMC Networks will channel new products to these carriers and pass their peering directly on to all existing peering partners. As a result of these direct relationships and having shortest path for internet connectivity, African carriers will effectively emerge as tier 1 ISPs says Walker.

The company is also providing interconnectivity between regional carriers and between the regions themselves, where legally possible, to retain local content.

Walker added, "Over the last 28 years, CMC has grown its network organically, and has responded to this region's increasing appetite for reliable and secure data and internet connectivity. CMC's research has shown that Africa's demand for high quality bandwidth is growing by some 30% p.a. CMC has cultivated a blue-chip customer base driving international traffic into Africa but is also presently experiencing a growing amount of traffic leaving Africa from African customers. This investment by Carlyle will accelerate CMC's growth through greater investments into new partnerships and acquisitions."

Martin Springer, MD of CMC said, "CMC has quadrupled its revenue in the last five years and at present we have in excess of 100 POPs, 2000 circuits, and, through our carrier customers, we currently manage high quality data and internet connections to over 400 enterprises, including over half the Fortune 500. We have an extensive geographic footprint, which enables us to serve multi-geography and multi-site customers. We believe this investment from Carlyle is opportune as it allows us to rapidly pursue new markets, products and avenues for growth."

Braam Verster, a Director of Carlyle's Sub-Saharan Africa Fund said: "We are excited about our partnership with CMC and its talented management team. We believe the fast growing data demand in Africa and the Middle East offers tremendous growth opportunities for CMC, and we look forward to using our sector expertise and global network to help them achieve their goals"

Equity for the transaction came from the Carlyle Sub-Saharan Africa Fund. This is the seventh investment by Carlyle's dedicated Sub-Saharan Africa fund.

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