Vodafone to take control
AFTER months of negotiations, Vodafone will take control of Vodacom.
Vodafone, the world’s biggest mobile phone group by revenue, will buy a further 15percent stake of South Africa’s biggest mobile phone group from Telkom, putting an end to the dysfunctional love triangle. It will pay R22.5-billion.
Vodacom, which was owned equally (50percent each) by Telkom and Vodacom, has long been stifled by a shareholders’ agreement that prevented it expanding meaningfully into Africa. Despite being the first to launch a mobile consumer service, it has been overtaken in the rest of Africa by MTN, which now operates in 21 countries, including in the Middle East.
The deal is subject to approval by 75percent of shareholders, the competition authorities and the Independent Communications Authority of South Africa.
It gives the UK-based Vodafone group a controlling 65percent stake in Vodacom and will allow Vodacom to list on the JSE.
Reuben September, Telkom’s chief executive, said yesterday: “The retained portion of the proceeds from the disposal will accelerate the development of our mobile and data strategies while also allowing us to expand selectively our geographic presence.”
Telkom will distribute 50percent of the cash to its shareholders and retain the remainder for investment projects that September said would be “disciplined”.
He said he expected the entire process, including the dividend payment, to be completed in the first half of next year.
The deal is expected to allow both Vodacom and Telkom the freedom to operate in all geographic areas and provide all possible services.
The previous shareholders’ agreement prohibited Vodacom from expanding into countries where Vodafone was active. That limited the number of locations to five countries.
Also, Telkom was not allowed to provide mobile services in African countries south of the equator in competition with Vodafone. The arrangement was a source of much tension, regularly voiced by retired Vodacom chief executive Alan Knott-Craig.
Vittorio Colao, Vodafone’s chief executive, could not hide his delight at the prospect of gaining a dominant position over Vodacom.
“We will continue to support the management team in their strategy of transforming Vodacom into a full service provider in Africa. We are confident that the transaction will deliver value to our shareholders,” Colao said.
Rajay Ambekar, an analyst at Cadiz Asset Management, said the transaction placed a premium value of R150-billion on Vodacom.
He said: “If Vodacom lists, it will probably end up having far less value — around R100-million — in market cap. Vodafone paid a premium for shareholder control.
“Shareholders will more than likely accept the offer next year. The government and Public Investment Corporation [with combined shareholding of more than 50percent] have already given their support.”
Lindsey McDonald of consultancy Frost and Sullivan said: “There seems to have been constant disagreement of how to carry the company forward.
“However, I don’t think Vodacom will be rebranded. This [would] cause confusion.”
Vodafone-Vodacom-Telkom deal discussion
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