MTN has taken an R88m bath on the sale of its 50% stake in Internet service provider Afrihost, the telecommunications group revealed alongside its interim financial results for the six months to June 2016, published on Friday.
MTN paid R408m in 2014 to acquire 50% (plus one share) of Afrihost. However, it has sold its stake back to Afrihost management just two years later for just R320m.
As a result, the group decided to recognise a goodwill impairment loss of R202m in the interim period on the remeasurement of the assets to fair value less cost to sell in accordance with accounting standards related to non-current assets held for sale and discontinued operations.
In its 2014 annual results published in March 2015, MTN revealed that it had shelled out R408m to acquire the controlling stake in Afrihost. It said at the time that a large portion of the value of the deal was made up of goodwill.
Goodwill is an intangible asset that arises when a company makes an acquisition at price higher than the company’s value. This additional value is paid for an acquisition target’s brand, customer relations, patents and proprietary technology, among other things.
MTN’s acquisition of Afrihost was concluded in November 2014.
“This, as well as future acquisitions in this space, will be important in supporting our ambitions in this area,” MTN said in March 2015. “Control over Afrihost will enable the group to drive its accelerated SME strategy and provide scale for the group’s virtual market, content and cloud offering.” — © 2016 NewsCentral Media