Titans square off
Analysts say Vodacom's agreement with pay-TV operator MultiChoice to resell DStv illustrates that the cellphone group's shareholding structure is dysfunctional and that relations between it and 50% shareholder Telkom may have broken down completely.
Vodacom's deal with MultiChoice is a direct challenge to the fixed-line operator's new Telkom Media subsidiary. Telkom Media, which has a budget of R7,5bn, has aggressive plans to compete in pay-television, a market that is dom-inated by MultiChoice.
It has said it will launch pay-TV bouquets that start at R100/month, targeting the emerging black middle class. But now Vodacom and MultiChoice are offering two new DStv bouquets targeting the same market and available for R139/month. The new bouquets will make Telkom Media's entry into the market more difficult.
Arthur Goldstuck, MD of research firm World Wide Worx, says Vodacom's MultiChoice deal underlines the "extent to which there is a lack of strategic congruence between the activities of Vodacom and Telkom".
Asked whether he believes Vodacom Group CEO Alan Knott-Craig is being deliberately provocative, Goldstuck says: "One certainly gets the impression that he is cocking a snook at Telkom."
One JSE analyst, who ask ed not to be named, says: "It is evident that Vodacom's shareholding structure is dysfunctional and I can understand why Telkom would prefer another mobile partner. "
The UK's Vodafone, Vodacom's other shareholder, has long said it would like to buy Telkom's stake. Market talk is that the growing tensions between Telkom and Vodacom could lead to the fixed-line operator selling out and seeking another mobile partner, possibly Cell C.
Cell C's largest shareholder, Saudi Oger, is keen to sell its stake but market talk is that it has attached a valuation of about US$3bn to the business. "If Telkom paid that, the market would take a dim view, especially given that it would take further investment to bolster Cell C's market share," the analyst says.
The MultiChoice deal is not the only one that is likely to cause conflict. The cellphone group is also building a powerful Internet service provider (ISP) business that will compete head-on with Telkom and tier-one ISPs.
Vodacom has hired away several of Telkom's top executives to run the new company.
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