Since its advent in March 2020, the COVID-19 pandemic has made the global economy highly unpredictable and volatile to a myriad of socio-economic challenges — making it a gamble for any investment. Markets took a nosedive as the international economy stalled for months, with investors watching their assets dwindle amid a continuing flow of negative financial news.
However, in periods of crises, there are always opportunities. Despite the dire financial outlook globally, Liquid Telecom, owned by Zimbabwean billionaire Strive Masiyiwa, leaped to issue an $840-million bond on the international market on Feb. 22, 2021 — one of the largest-ever dollar bond sales by an African telecom company. Few anticipated that the issuance would be oversubscribed, especially with the pandemic still biting the global economy hard.
Liquid Telecom issued the bond to pay up existing debt and boost Internet access across Africa. A total of $620 million were issued on the global bond markets, together with a $220 million equivalent South African Rand term, amounting to a combined $840 million bond issuance.
The group announced in a press release that the security was five times oversubscribed with an excess of 230 investor orders, including anchor orders from the International Finance Corporation, Development Finance Institute and Emerging Africa Infrastructure Fund.
Liquid Telecom said the orders totaling a whopping $3.2 billion were more than five times oversubscribed, helping to drive a coupon rate of 5.5 percent compared to the group’s 8.5-percent debut bond coupon in July 2017.
Commenting on the oversubscription, Liquid Telecom CFO Kate Hennessy said: “We are very pleased, considering the challenging times we are in, that investors in the international debt markets have supported us with such a successful refinance. The level of interest from high quality investors has been unprecedented for an African issuer and reflects the confidence that investors have in the future growth strategy for the Group as we address underdeveloped telecommunications and internet access across Africa.”
As of the end of March 2020, Internet penetration in Africa stood at 11.5 percent, as reported by Internet World Stats. Only an estimated 526,710, 313 users had access to the Internet. Limited broadband service is the major reason why using the Internet is costly on the continent. Yet, Africa displayed resilience in 2020, recording considerable growth in its digital economy.
As of December 2020, Nigeria, Africa’s most populous nation, recorded more than 203 million Internet users with 74 percent of Web traffic generated through smartphones and about 24 percent through PCs, Statista reported. The country has experienced a surge in users in recent years due to the increasing penetration of smartphones and growing competition on the market.
These trends prompted the IFC to forecast that Africa’s Internet economy will likely contribute $180 billion to its GDP by 2025, reaching $712 billion by 2050. The IFC is a primary subscriber to the group’s latest issuance. Capacity reported that the IFC invested $100 million in the bond.
