Fire sale
AS TALKS FOR THE cherry picking of Telkom’s fixed line and cellular businesses gather momentum, much is being speculated about the future of a leaner Telkom. Cash-flush pan-African cellular operator MTN – keen to dominate in the lucrative corporate data market – is eyeing some of Telkom’s fixed line assets.
British telecoms giant Vodafone has made no secret of its intention to buy out at least a portion of Telkom’s stake in the duo’s joint Vodacom cellular business. And it’s only Vodacom’s cellular business that the British group is reportedly interested in.
Should Vodafone succeed in gaining control of Vodacom – which is likely, as price is said to be the only sticking point – what does the future hold for Vodacom’s other business interests outside cellular and acquired through its venture capital arm?
Among Vodacom’s venture capital group’s other investments is a 10% holding in fledging broadband purveyor iBurst. Late last year it also bought a 26% stake in G-mobile, holding company of SA Wi-Fi hotspot operator Wireless G, to add to its growing broadband portfolio.
iBurst has more than 40 000 subscribers. Wireless G has in excess of 400 Wi-Fi hotspots – many managed of behalf of existing partner Telkom – spread throughout SA in conference centres, shopping malls (including Sandton City), hotels (Southern Sun) and News Cafés.
In the bigger scheme of things, Africa Analysis analyst André Wills says Vodacom’s divestment from Wireless G wouldn’t adversely affect the future of the wireless hotspots operator. Wills says Vodacom’s 26% was insignificant to influence its strategic direction.
Says Wills: “Of strategic interest to Vodafone is Vodacom’s cellular business, not the assets folded into the group by its venture business. With Vodacom’s data services posting impressive revenues in the last reporting period, divesting from Wireless G would in no way affect its revenue momentum.”
In its last reporting period Vodacom increased its data revenue by 64% to R3,342m, contributing 8,1% to mobile operating revenue.
Arthur Goldstuck, executive director at research group World Wide Worx, says both Wireless G and iBurst have added little value to Vodacom. “There’s been a duplication of service delivery channels as a result of the acquisition of Wireless G and iBurst. It’s thus difficult to identify the strategic value generated from the acquisition of those two businesses. I can only speculate that the motive in Vodacom buying both companies was to nullify possible interest from the competition.”
Vodacom’s plans to spend billions of rand on fibre optics to ring major urban cities are an effort to challenge MTN’s dominance in the corporate data space. That should render Wireless G and iBurst irrelevant to its future prospects. More than Vodacom, they’ve benefited most from the cellular group’s brand appeal. But it’s iBurst that could be most affected should Vodacom’s new owners decide to dump the SA group’s venture business interests. The broadband purveyor has embarked on a massive countrywide infrastructure network rollout.
A sustained relationship with Vodacom would almost certainly have guaranteed iBurst the cash required to deploy more than 150 new base stations countrywide. And only recently, iBurst lost a high value contract that over the past three years had been its major revenue spinner: to manage and provide network solutions to SA’s national Lotto operator.
Says Wills: “In all fairness, iBurst as a technology hasn’t taken the world by storm. Just up to what level can you further develop the technology? The only other reason that it’s enjoying customer appeal is that Telkom is battling to meet growing consumer demand for its ADSL offering. Other than that, it’s easy and quick to install, unlike ADSL.”
The one asset that iBurst has that Vodacom might not like to let slip through its fingers is the WiMax spectrum that communications regulator Icasa has already allocated to iBurst. With many pinning their hopes for the next generation of wireless broadband services on that technology, the initial choices that iBurst has made may be overtaken by the demand for WiMax services. With the spectrum already secured, it might be prudent for a Vodafone-controlled Vodacom to keep its broadband options open.
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