Can't find what you are looking for? Usethe advanced search
13Nov2006
Advance Equity enters mobile phone-based payment business
The private equity firm Advance Equity Holding bought 75% of the share capital of the technological company SEP Bulgaria (System for Electronic Payments Bulgaria) JSCo, which plans to build a system for electronic payments via mobile phones in Bulgaria. The current investment amounts to BGN 750 000, but on Friday the shareholders’ meeting of SEP Bulgaria voted for an increase of the capital to BGN 5 mln, of which Advance Equity will have 70%, paying a total of BGN 3.5 mln. The Karoll’s company plans to support further the financial needs of this project which in the next 5 years are expected to reach BGN 15 mln.
The project for a payment system will need an approval and licensing for a system operator by the Bulgarian National Bank, a process that could take up to 6 months. The payment solution designed by SEP Bulgaria should be commercially viable shortly after the necessary license is granted. Until then the company will be working for creation of a commercial alliance with the mobile operators and the banks for offering of integrated services for electronic payments via mobile phones. According to one of the founders of the company – Mr. Atanas Sharkov – the plans are to have on board at least 3-4 banks and 2 of the 3 local wireless carriers for the initial launch of the platform.
“The period of the investment and the exit strategy are not yet discussed, but it is expected to be no less than 5 years”, said Mr. Ventzislav Petrov, CEO of Advance Equity Holding. According to him, the third year of the project will be crucial for a break-even. Beyond this period Advance Equity will start recouping its investment, and at the time of its exit the internal rate of return might exceed even 100%. “It is natural to expect a higher rate of return for riskier projects”, noted Petrov.
The Advance Equity Holding portfolio already includes a 34% stake in the compressed natural gas supplier ENESY, 100% stakes in Energy Invest, a renewable energy company, and Energy Effect, an energy efficiency company, and a 90% stake in the agricultural company Agro Terra North. The investment in SEP Bulgaria is, however, the largest private equity deal for Advance Equity and the first one in the field of the information and telecommunication technologies. The other shareholders in SEP Bulgaria are Atanas Sharkov, who is a founder of the alternative telecom-operator Nexcom Telecommunication, the former chief executive director of the Bulgarian Stock Exchange (BSE) Mr. Penio Hadjiev, and the software company Sirma Group JSCo.
Prior to its last investment, Advance Equity had committed 18% of its funds raised (nearly BGN 12 mln). Currently, the invested funds are about 46% of the total. Advance Equity conducted an Initial Public Offering of shares for BGN 10 mln in the summer, and the secondary trading with the shares on BSE began in late October. On Friday, over 10 000 shares of Advance Equity have been traded at an average price of BGN 1.07, which is 0.94% higher than the previous day’s price.
----------
The system for electronic payments allows the consumers a 24-hour access to the so-called consolidated wallet (electronic account), which includes checking accounts, saving deposits, credit lines, debit and credit cards. The system will be suitable for making payments in restaurants, paying the monthly bills for utilities, buying books, clothes, and other consumer goods. The fee for using the system will be set as a percentage of the deal value. The POS-terminals will be delivered for free where needed, and the service will not be charged to the consumers.
