Intel Capital, chip maker Intel’s investment business, on Thursday said it would invest US$5m in JSE-listed technology group Altech in a move it is describing as a way of tapping into the broadband boom taking place in Africa.
It’s the first investment in SA by Intel Capital, whose director, Samuel Mensah, says will allow the company to get access to a continent with 1bn people spanning 54 countries. The investment is made up of a convertible, three-year debt instrument. One to three years after the investment, Intel is entitled to convert the instrument into shares in Altech, assuming the deal is approved by Altech shareholders.
“The big issue, really, is the fact that Intel — a major Silicon Valley player — has invested in an African technology company,” Mensah says. He says Intel considers Altech a technology company with “great technical expertise, on par with anything we’ve seen elsewhere in the world”.
Many companies have realised the way to address Africa is as a block — that is, to target the opportunities the content affords as an aggregated one rather than a fragmented one, Mensah says. The biggest attraction for Intel is Altech’s “pan-African ambitions and existing foothold in East and West Africa”.
He says further investments are in the pipeline. The increased number of undersea cables landing on African shores has resulted in more capacity than there is demand. “Until not long ago, Africa only had Sat-3’s 120Gbit/s capacity. Now, with all the other undersea cables, both finished and in progress, Africa will have over 10Tbit/second. It’s like moving from a dirt road to a six-lane superhighway. We want to help take this capacity inland. Then we have to give people something to do with the capacity.”
Intel is trying to figure out “what services and applications Africans are going to demand over the next five years”, says Mensah. “Most Africans who access the Internet for the first time do it through a cellular phone. Handhelds are going to play an increasingly important role in the next 3bn users migrating onto the Internet. Strategically, this is very important for Intel”.
Mensah says Intel’s investment goals aren’t just financial, but strategic, and that the Altech seemed to meet both requirements. The deal gives Altech “access to Intel’s technical resources and global reach”, he says. “Altech can benefit from our global perspective and our technology resources.”
The deal won’t be finalised until Altech’s shareholders meet on 20 July, but Mensah says Intel doesn’t expect any objections. “It’s up to the shareholders, but we don’t expect any surprises. It’s a good deal for everyone.” — Craig Wilson, TechCentral
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