South African ISP consolidation with Webafrica buying Mweb

Mweb, which is owned by Dimension Data, is the latest Internet service provider being sold to a competitor as consolidation in the market continues.

On Tuesday, MyBroadband reported that Dimension Data has accepted an offer from Webafrica to acquire Mweb for an undisclosed amount.

Webafrica chief commercial officer Greg Wright said the deal is “being funded with their balance sheet”. It is not clear whether Webafrica will buy Mweb using cash, a loan, or equity.

They expect an answer from the Competition Commission on the proposed transaction by 1 November 2023.

Mweb will continue operating as an independent entity, and Wright said they aren’t expecting any layoffs due to the deal.

Dimension Data said the transaction aligned with its strategy of focussing on core markets servicing its enterprise client base.

“We are continually refining our portfolio of services to ensure relevance to our clients,” said Dimension Data CEO Alan Turnley-Jones.

“Dimension Data is also on a journey to integrate with our global shareholder, NTT. The decision to sell Mweb will enable us to accelerate this journey.”

Webafrica CEO Sean Nourse, who served as Mweb CEO between October 2017 and July 2020, told MyBroadband that he was excited about the deal.

“We’re ecstatic to bring onboard one of SA’s most loved brands and can’t wait to welcome their staff and customers into the Webafrica family,” Nourse said.

Webafrica buying Mweb is the latest deal in the South African ISP market, where consolidation is currently the name of the game.

Interestingly, Webafrica was put up for sale in 2019 with the help of Standard Bank, with a price tag of around R300 million.

Many service providers were interested, including Afrihost and MTN’s Supersonic. However, no deal was struck as the offers peaked at R220 million.

Afrihost has been the most aggressive Internet service provider, with big acquisitions in recent years.

Afrihost, which already owns a large stake in Axxess, acquired fibre-ISP Cool Ideas in 2021 and Home Connect in 2023.

More consolidation is expected in the local telecommunications market as scale makes it easier for service providers to prosper.

Another benefit is that it is easier to find a black economic empowerment (BEE) partner who can add value to the business.

On 31 March 2021, the Independent Communications Authority of South Africa (ICASA) published regulations requiring all telecom licensees, including ISPs, to have black shareholders.

“An Individual Licensee must have a minimum of 30% of its ownership equity held by black people, determined using the flow-through principle,” the regulations state.

Telecommunications companies – both individual and class licensees – must also have a minimum B-BBEE contributor status of level 4.

Large individual licensees were given 36 months to comply with the regulations, while class licensees and SMMEs had 48 months.

With the 1 April 2024 deadline looming, large ISPs are under pressure to find a suitable black partner to comply with the regulations.

Big ISPs have an advantage as they can approach established BEE firms with deep pockets and the ability to add value to the business.