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Africa Cellular Towers To Commence With Capital Raising Roadshow

31 October 2006

Africa Cellular Towers Limited (“ACTowers”) will commence with its capital raising roadshow on Wednesday, 1 November 2006 in order to raise R100 million, through a private and vendor placing, to accelerate organic and acquisitive growth; enhance investor and general public awareness of ACTowers, its activities and specialised skills; broaden ACTowers’ shareholder base and to obtain the spread of shareholders required for the listing of ACTowers’ ordinary shares on the JSE Limited and afford members of the investing public, clients and business associates of ACTowers the opportunity to participate in the growth of the company.

ACTowers is a leading provider of communications solutions. The company’s main business is the manufacturing and fabrication of steel communication towers, portal factories, steel fencing, diesel and water tanks, solar structures and general steel engineering. The company also manages ‘turnkey’ telecommunications network projects, including global systems for mobile telecommunications, wireless local loop, fixed wireless and very small aperture terminal technology, a highly specialised industry.

ACTowers services mobile operators in a number of African countries and was responsible for the first cellular towers in Africa. With offices in Johannesburg, Democratic Republic of Congo (“DRC”), Gabon and Sudan, the company currently operates in 24 African countries out of a potential 53 in Africa, as well as in the Gulf States, Dubai and Kuwait, and India.

ACTowers has completed more than 900 projects in Africa since its inception in 1999, which includes the construction of more than 3,000 towers at some of the most rural and remote areas in Africa. The company has built up a strong reputation and track record with well established cellular operators in Africa, and is the only company which provides both the manufacturing and project management of cellular sites.

In Africa, mobile telephony is now firmly entrenched as the predominant mode of communication in almost every nation and has also expanded rapidly in recent years in other emerging markets. The Goldman Sachs Commtech team forecasts nearly 4 billion subscribers by 2010 globally, from 2 billion currently, with the bulk coming from emerging markets.

Africa’s market is perceived to be the fastest growing cellular phone market in the world, on average having grown by over 30% between 2002 and 2004. A large number of African countries have also achieved triple-digit compound annual growth rates for the period 1998-2005. This phenomenal growth is primarily due to the small number and high costs of fixed line connections, which are mainly located in major urban areas. This has resulted in the high demand for cellular phones. The fixed-line telephone sector in Africa is also a near monopoly, with each country normally having one carrier. As a result, the telecommunications sector is in the process of being restructured in various African countries, creating new opportunities for growth. Leading Pan-African mobile telecommunications company Celtel, in September launched One Network, the first ever borderless mobile network in the world. This service allows customers in East Africa to move freely across geographic borders without roaming call surcharges and without having to pay to receive calls. A lack of fixed-line infrastructure as well as low PC penetration means that the growth opportunity for mobile internet is considerable.

ACTowers’ customer base consists mostly of emerging markets cellular operators, in Africa and the Middle East with Celtel controlling operators to date contributing 73% of the ACTowers’ revenue. The listing will enable ACTowers to implement their strategy to diversify their customer base further in Africa, the Middle East, and India.

“The overall objective of ACTowers is to become the leading supplier of telecommunications solutions in emerging markets, driven by organic and acquisitive growth” says CEO Chris Kruger. “We will expand the current products and services to provide more flexible solutions and cost efficient products.”

Turnover for the year ended 28 February 2006 was R129.4 million and is expected to grow by 21.5% to a forecasted turnover for the year ending 28 February 2007 of R157.2 million. This growth will be obtained through the involvement in a number of projects in the emerging markets. Turnkey solutions make up 60% of ACTowers’ revenue and 40% of revenue is made up of customers requiring components only (maintenance related projects).

ACTowers achieved an earnings before interest, taxation, depreciation and amortisation (“EBITDA”) for the year ended 28 February 2006 of R29.3 million (an EBITDA margin of 22.7%) and is forecasting EBITDA for the year ending 28 February 2007 of R34.5 million (an EBITDA margin of 22.0%). The profit after tax (“PAT”) for the year ended 28 February 2006 was R21.2 million (a PAT margin of 16.4%) and they are forecasting a PAT for the year ending 28 February 2007 of R25.6 million (a PAT margin of 16.3%)

Chris Kruger, an entrepreneur and turnkey specialist says, “As one of the country’s largest providers of communication solutions in the emerging markets, ACTowers aims to capitalise on the current market conditions to increase its market share and to be a prominent player within the construction communication solution industry.”

Wessel Van der Merwe of Exchange Sponsors says “I am excited about ACTowers as I believe the company is ideally positioned to target the ever expanding telecommunications industry, particularly in emerging markets."