Page 7 - MCOM MODEL ANSWER 2

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1. MANAGEMENT BUY OUT (MBO)
MCOM Group could sell its interest to the Managers who run MCOM Nakolia who may
need to source the necessary funding from venture capitalists, banks; private equity

firms and other financial institutions to effect payment. This approach is normally

speedy as the current Managers would understand the business quite well.
2. TRADE SALE
This will entail putting up the whole of MCOM Nakolia for sale to a third party group of
investors which obviously may not be as appealing to the current Managers as they may

have preferred to be given the opportunity to buy first.
3. IPO

MCOM Group could pursue an IPO for MCOM Nakolia. The problem with an IPO is
that the company will have to satisfy certain stringent criteria in order to join the
NSE, and there will be significant costs associated with the listing. This in any event,

is one of the requirements imposed in Option 3.

Please keep in mind MCOM Nakolia contributes 48% to Group EBITDA and hence

approximately 48% of our earnings and value as a Group. It would be obvious to the markets or
any potential investors that the reason for selling is our desperation to walk away following our
failure to manage our relations with the government of that country. At best the buy price for

each option will be lower than the true value of our Nakolia holding due to the pressure to sell
and walk away, and at worse, it will cast doubts on our ability to proactively manage relations
with any other governments. We operate in 22 other countries. In this industry, ability to win

mobile operator licenses and to keep within and proactively manage the regulations that come
with that, we will consider to be a threshold competence and a Critical Success Factor (CSF).
Withdrawing from Nakolia therefore, may be seen as an indictment on our competencies and

most certainly, will see a 48% collapse in our market capitalisation, potentially eroding our
standing as the leading mobile operator on the continent, giving room to V-Mobile to charge

forward. Apart from the Chininsia Opportunity you have asked us to conduct Due Diligence on,
which is likely to only add 2% (S$6,618m/S$299,000m) on our current value, any cash raised
from selling-off 48% of our business and invested in this opportunity will still constitute a net

46% loss of value. We do not have any other immediate opportunities to invest the cash in.
Even so, withdrawing does not absolve us from paying the fine. We could use the proceeds to

pay it off, but if we could do this, we may as well stay and negotiate. If we leave whilst disputing
the amount, we will have to instruct buyers to effect payment to MCOM Group in Sadimba
directly but even so, it would be a very bad idea to leave behind such a dispute with the

government. This government is likely to be a member of the African Union and other trade and

Developed by The CharterQuest Institute for 'The CFO Case Study Competition 2016'
www.charterquest.co.za | Email: thecfo@charterquest.co.za