Waiting for Vodafone
ALTHOUGH THE MARKET has suspected for some time that Britain’s mobile giant Vodafone would want to snap up the remaining 50% of South Africa’s biggest mobile operator – Vodacom – that it doesn’t already own, CEO Arun Sarin’s confirmation of that objective has people wondering exactly when it might make its move.
Sarin was widely reported at the recent release of Vodafone’s results as saying that it wanted to expand further in emerging markets and would consider acquiring Telkom’s 50% stake in Vodacom. However, Sarin also reportedly said he’d be happy to continue as a 50% shareholder and was awaiting the outcome of a strategic review by Telkom.
Renaissance Specialist Fund Managers’ Khulekani Dlamini says the market was waiting for something to happen on that front – it was just a question of when. He says he’d first like to see Vodafone make a few other emerging market deals to determine what kind of premium it would offer Telkom for its stake.
It would have to value Vodacom above the R106bn implied by its previous buy – of another 15% from VenFin. Another number being bandied about in the market concerning the upcoming black economic empowerment transaction was R110bn, Dlamini says, which represented a discount.
Another marker was the £5,2bn value that Citigroup reportedly put on Telkom’s 50% stake (around R73bn, implying a value of nearly R150bn for Vodacom as a whole).
However, the future home of Telkom’s Vodacom stake will be only one issue among many others that analysts and fund managers will hope to hear mention of in the forthcoming annual results presentation this Wednesday.
The market already knows what to expect from Vodacom, which gave an indication of key performance metrics at the time of Vodafone’s results. However, the issue of Vodacom’s further expansion into Africa will no doubt come up, particularly in the wake of Vodafone relaxing its shareholders’ agreement, which had previously restricted it from going further north than sub-Saharan Africa.
But perhaps most top of mind would be who would head Telkom after Papi Molotsane’s departure in April.
Dlamini says the market was pretty comfortable with Reuben September acting in the position. But he hoped to get some guidance from Telkom – though it was unlikely to know at this stage who the new CEO would be – as to the calibre and character of the person it’s looking to appoint.
Dlamini says he’d also like some indication from Telkom concerning the quality of management in the second, third and fourth layers down after the recent high profile departures of Wally Beelders and Thami Msimango (both went to Vodacom).
An appointment to the team of non-executive directors, such as that of outgoing Massmart CEO Mark Lamberti recently, adds weight to the board, particularly after the departure of Lazarus Zim, and seems to be a move designed to instil confidence.
Another topical issue is the outcome of the Competition Tribunal’s decision concerning the Business Connexion deal. Although both share prices have recently ticked up, Dlamini says the market was not yet entirely convinced or the price wouldn’t be trading at such a significant discount to the 925c offer price. The tribunal should rule around month- end or early in July.
Growing into the information and communications technology services market is one avenue that Telkom has said it will pursue to replace declining revenue streams elsewhere. Pay television is another.
Regulator Icasa is currently wrapping up a process of oral hearings into the applicants for new subscription TV licences but hasn’t given an indication of when it would announce the awards.
Telkom has made a number of appointments to Telkom Media, its vehicle into the satellite and cable TV market. They included Mandla Ngcobo, its former chief of corporate affairs, as new CEO; Setumo Mohapi as chief technical officer; Jimi Matthews to head news; and Johncom’s ousted CEO Connie Molusi as chairman.
Dlamini says he’d like to get a sense of what margins Telkom would expect to earn from those new ventures, plus the kind of margins being obtained from its broadband offerings and the progress it has made concerning penetration.
Loading ...