The acquisition of MainOne Cable Company Limited, a West African data centre and connectivity solutions provider, by Equinix, a global digital infrastructure company may be one of the business deals needed to open the floodgate of more Foreign Direct Investments (FDIs) into Nigeria at a period of increasing appetite for FDIs.
African markets came into reckoning last week with the announcement by Equinix, one of the world’s digital infrastructure companies, of its expansion into Africa through a deal to acquire MainOne, a company that offers wholesale broadband services through a system of cable networks and fibre optic infrastructures.
The deal is scheduled to conclude in the first quarter of 2022, pending the fulfillment of customary closing conditions, including the requisite regulatory approvals.
Nigeria, with a population of over 200 million people, is Africa’s largest economy, and along with Ghana, has established itself as a data centre powerhouse. Equinix will be able to enter the continent with this acquisition.
MainOne owns and operates a subsea network from Nigeria to Portugal, as well as 1,200 kilometres of reliable terrestrial fibre networks across southern Nigeria.
A statement by Equinix said the transaction has an enterprise value of $320 million.
Rising investors’ appetite
Financial experts said although the coverage of the investment in Africa, given the fact that MainOne infrastructure is present in Nigeria, Ghana, and Cote d’Ivoire (with the establishment of its tier 111 data centre in these countries), however, it is still being celebrated as an indication of rising investors’ appetite in Nigeria.
To these categories of analysts, Equinix’s acquisition of MainOne should be seen as the beginning of good things to come. “This transaction is a testament to the readiness of Africa, nay Nigeria to offer international investors ample opportunities to realise their dreams,” a top player in the telecoms sector, who prefers to be anonymous stated.
His opinion was corroborated by that of the President and CEO, Equinix, Charles Meyers, who explained that “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.”
He assesses that “Growth of data consumption in Africa is amongst the fastest in the world, and our customers are looking for a trusted partner to pursue the opportunities presented by broad mobile adoption and greater connectivity across the region. 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.”
The President, EMEA, Equinix, Eugene Bergen also said the expansion in Africa, “has long been a strategic priority for us. With MainOne, we have found a company that not only has highly complementary data center and connectivity assets but can further accelerate the expansion of our business model and growth objectives.”
Chief Analyst and Research Director, Synergy Research Group: John Dinsdale said: “Africa has been the missing piece in the Equinix jigsaw, and this acquisition of MainOne will be a great first step onto the continent. The demand for data center services in Africa is strong, with Nigeria at the epicenter of exponential economic growth in West Africa. Nigeria is Africa’s largest country by both population and economy, and its growth drivers include rapid mobile adoption, increased data consumption from its young population, good subsea and terrestrial connectivity, and a strong enterprise market. This is advancing the region toward a more digitalized economy and driving data center growth and expansion to provide much-needed digital infrastructure.”
Speaking with THISDAY, Managing Director/Chief Executive Financial Derivatives Nigeria Limited, Mr. Bismarck Rewane said while the Equinix/MainOne business combination has Africa as a focus, the significance and timeliness of the transaction on Nigeria’s appetite for foreign direct investment should not be underestimated.
He believed that Nigeria’s population as well as its vast market especially in Africa has shown that its economy will benefit from the business synergy between Equinix and Mainone.
He stated, “Foreign direct investment and acquisitions are okay. The acquisition of MainOne by Equinix is good but it’s more of an African issue. The MainOne asset is not only in Nigeria, but it’s also a cable that goes across Africa and they are looking at Ghana and others. It’s more of an endorsement of the African investment climate than that of Nigeria. Even if you take Nigeria out, it’s a big market as all these other countries will begin to use submarine cables. We should not look at it as a Nigeria-specific investment initiative, but we should look at it from Africa as a continent, however, we cannot talk about Africa without talking about Nigeria.”
The deal
Equinix believes MainOne to be one of the most exciting technology businesses to emerge from Africa. Founded by Funke Opeke in 2010, the company has enabled connectivity for the business community of Nigeria and now has digital infrastructure assets including three operational data centres, with an additional facility under construction expected to open in Q1 2022. Upon closing, these facilities will add more than 64,000 gross square feet of space to Platform Equinix®, with 570,000 square feet of land for future expansions.
MainOne owns and operates a subsea network from Nigeria to Portugal, as well as 1,200 kilometers of reliable terrestrial fiber network across southern Nigeria. These are all improving connectivity to and from Europe, West African countries, and the major business communities in Nigeria. When completed, this acquisition will extend Platform Equinix into West Africa, giving organisations based inside and outside of Africa access to one of the world’s fastest-growing markets.
Under the terms of the transaction, the management team, including CEO Funke Opeke, will continue to serve in their respective roles. The transaction is expected to close in Q1 of 2022, subject to the satisfaction of customary closing conditions, including the requisite regulatory approvals.
Other parts of the deal include the plan to open three operational data centres, with an additional facility (under construction) by the first quarter of next year. These facilities will add more than 64,000 gross square feet of space to Platform Equinix, in addition to 570,000 square feet of land for future expansions.
It also includes an extensive submarine network extending 7,000 kilometres from Portugal to Lagos, Accra, and along the west African coast, with landing stations in Nigeria, Ghana, and Côte d’Ivoire and a terrestrial network of more than 1,200 kilometres of reliable terrestrial fibre in Lagos, Edo and Ogun states. Other parts of the deal also include connectivity to terrestrial sites which extends across 65 PoPs (points of presence) in cities across Portugal, Nigeria, Ghana, and Cote d’Ivoire; Access to key internet exchanges enabling low latency to key global networks, including Amazon, Microsoft, Apple, Google, and Facebook; An estimated 800+ business-to-business customers, including major international technology enterprises, social media companies, global telecommunications operators, financial service companies and cloud service providers and nearly 500 employees and a management team with a deep understanding of local and international markets.
On her part, Opeke said: “Equinix will accelerate our long-term vision to grow digital infrastructure investments across Africa. I thank our founding shareholders led by Mr. Fola Adeola, MainStreet Technologies, AFC, PAIDF, FBN, Polaris, and AfDB for investing in the MainOne vision to bridge the digital divide in Africa.
“With similar values and culture to what we have jointly built in 12 years, Equinix is the preferred partner for our growth journey. The MainOne team is excited about the partnership created through the acquisition, and we look forward to building our next chapter together.”
Investment inflow
The excitement over the Equinix/MainOne deal was not unconnected with the fall in FDIs inflow, especially in the earlier part of the year. The fall has been identified as one of the causes of the volatility in the nation’s foreign exchange market.
According to the National Bureau of Statistics, FDI dropped to $77.97 million in Q2 2021, indicating a 49.6% and 47.5% decline compared to $154.76 million and $148.59 million recorded in the previous quarter and Q2 2020 respectively.
The last time Nigeria recorded lower FDIs, was in Q1 2010 when it managed to attract foreign direct investments valued at $73.93 million.
According to the Organisation of Economic Co-operation and Development (OECD), FDI is an integral part of an open and effective international economic system and a major catalyst to a country’s development. Foreign Direct investment boosts the creation of jobs in the host country as investors build new companies in the country, which in turn leads to increased income, more purchasing power, and an overall boost in the economy.
