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08 May 2017
| Alan Burkitt-Gray
Weeks after private equity group Carlyle bought a controlling stake in CMC Networks, the African carrier’s CEO, Grant Walker, tells Alan Burkitt-Gray some of what he plans to do with the money
After 28 years of organic growth,
African carrier CMC Networks is on the lookout for
acquisitions. Founder and CEO Grant Walker says that the
company is engaged in "a couple" of negotiations, partly to
acquire fibre assets, partly to acquire people and intellectual
Why now? It helps that in February the largest private
equity fund in the world bought control of CMC for a sum
believed to be more than $100 million.
The Carlyle Group, whose investments include stakes in
French telecoms group Altice and US mobile services company
Syniverse, now has a majority stake in CMC, which is based
between the South African cities of Pretoria and
The money comes from Carlyle’s Sub-Saharan
Africa Fund, which has already invested almost $300 million of
its $698 million of committed capital "across a variety of
industries" – making it likely that CMC is one of its
largest investments since the fund was set up five years
CMC, which Walker set up in 1989, has the largest managed
connectivity network in Africa, with a footprint extending to
the Middle East. It interconnects with 50 of the
Carlyle met Walker’s criteria when he started
the hunt for an investor. "We were looking for pretty deep
pockets," he says. "We are the biggest performing African
carrier, with 50 countries and 90 PoPs. In the Middle East we
have 14 countries and 23 PoPs and we are growing." And the
group has just made its first moves into South America and
The hunt began when "one of our investors wanted to step
down", he says. "We had 20-30 people knocking on our door each
month and we went to see what is out there. Carlyle came in
with very deep pockets – and we thought we could
utilise the relationship." The new investor "can support our
strategy in the Middle East and Africa".
He doesn’t expect anything from
cross-fertilisation with other Carlyle investments. "They
don’t look to interfere unless the business is not
performing," says Walker. But there’s a new board
with new people and the outlook is positive. "It comes down to
the ability to deliver."
So what’s the CMC story? "We’ve
always been a very low-key company," says Walker, who began the
company "out of the boot of a car. When I started the business
I was 18 years old. I was young and dumb and an
Since then, "we have been on a growth path". There was one
point of presence 15 years ago and three locations, to
today’s extensive network.
It’s almost all wholesale. That’s
CMC’s focus today, though it has had enterprise
customers in the past. "We have reduced our enterprise
business, but we are not going to leave any client that
supports us," he says. "If one of our clients wants to migrate
from us we will support them, but we will not chase new
enterprise business. There are legacy clients that we shall let
go in the right circumstances. They have been good to
CMC focused on wholesale to avoid competition from other
operators in the African market, operators that are
CMC’s customers, he says. "When others moved into
our space we moved 100% wholesale and moved away from any kind
of competition. There are others that do enterprise and
wholesale. So if we’re coming to a channel,
we’re committing to a channel."
Which operators does CMC work with in the wholesale market?
That, Walker won’t say. "There’s not
a carrier that doesn’t deal with us. There are
many case studies we could use, but unfortunately we
can’t." He mentions one "very large customer"
– no names – that "turned a large loss to a
profit on a regional network in a year after it moved to
He adds: "A lot of awards are won by our clients" –
for projects that run on CMC’s network, he means.
"They always want to imply they own their own network but
they’re our clients and it’s good for
African network challenges
There are other stories he can’t tell
– of challenges installing networks in some parts of
Africa, for example. But CMC has focused on delivering advanced
products to the market.
"We did the first pan-African MPLS and Ethernet services,"
claims Walker. And Africa holds huge promise: "In the next ten
years, one in four people in the world will be born in Africa.
Already half of Nigeria is under the age of 15."
Africa is "where the world’s new resources are
coming from", and he expects huge investment over the next 15
years in enterprises across the continent.
For this "you’ve got to have the right network.
It’s very important to understand that we can
support those enterprises," he says. Service delivery is key.
"We stack up some very good numbers. "We put in resilience and
back-ups. There is no one else in Africa who comes close." CMC
uses its own fibre where it can, but ensures there is
redundancy "so there is no single point of failure", he says.
"We do have a fantastic reputation in the market."
Walker didn’t say so, but one of the long-term
challenges of Africa – finally being overcome thanks
to investments in telecoms – is that traditional
networks and connections still echo the old colonial
relationships, meaning that calls and data often had to be
routed via London or Paris. CMC and its competitors are at last
consigning that to history.
"We use very new technologies that we develop ourselves,"
says Walker. "We have our own intellectual property and and
engineering, running on Cisco platforms, which we manipulate to
meet our requirements." In order to achieve resilience, "we
have the ability to jump and switch across circuits in
hundredths of seconds", he adds. "Our service delivery
performance is beyond what others can do."
The aim is "to deliver new products across Africa, but
we’re not cheap and we don’t get a
return on day one", he warns. "We’ve got to retain
the pioneering view, continuously. We have a great story and
Carlyle was intrigued by it. And now we’ve a good
Walker says the company has "always had a seven-year view"
of where it’s going, "whether for investors or for
clients. We’ve pretty much lived up to that over
the years. We have a good vision and the ability to deploy
products essential to our customers."
CMC has a range of products in the research and development
queue waiting for deployment, he says. But one of the
challenges is getting the right staff as the company expands.
"If there are dynamic people in a region, and if we are looking
for people, that’s how we’d acquire
people. It’s a very simple way to help us grow,"
"We hold on to our staff," Walker adds. "We
don’t talk about staff turnover," because there
isn’t much. Until the Carlyle investment every
single director had been on the board for 11-21 years, he says,
and "middle management had not moved".
Google on steroids
So how do he and his colleagues motivate staff, who have
traditionally looked for promotion to more responsible
positions as senior people leave? "We’re a fun
company – we’re like Google on steroids.
It has to be when you’ve got a lunatic running
it," he claims, referring to himself in that last comment. But
also the company has grown, so it’s been possible
to move people around into senior positions across the
"I don’t believe that we’ve ever
had to ask anyone to leave. If people can’t fulfil
their role, they’ll tell us and we’ll
reposition them in the business. In some cases
we’ve moved people four times – we find
what works for them. Trust is better than mistrust." If people
are abusing the company’s trust "they get so
guilty because everyone else is so dynamic", he said.
He’s been having fun since he started the company.
"As people joined I wouldn’t stop having
Over the years "we’ve been through the mill",
in one of his few comments that hint it hasn’t
always been fun. "It’s taken a lot of guts and
hard work. Sometimes you have to put your life in your
He adds: "It’s taken us 28 years. But
we’re empowering Africa and taking our ideas to
other regions that don’t appear to be as different
– areas such as South America and the Middle
And now we will just have to wait to see where CMC spends
the cash from Carlyle’s deep pockets.