Vodacom will be in Top 40 when it lists

CELLULAR network operator Vodacom will instantly enter the Top 40 index of the Johannesburg Stock Exchange when it lists on Monday, even though its share price has yet to be determined.

Vodacom will join the rank of Top 40 blue chips alongside its former parent, Telkom, which will remain in the Top 40 despite shedding its stake in Vodacom. The cellular company will debut with more than 525-million shares in issue.

Telkom is selling 15% of Vodacom to joint shareholder Vodafone for a net fee of R20,95bn. Of that, Telkom will pay out R10,47bn pretax to its own shareholders in a dividend of R19 a share. They will also receive the newly listed shares as Telkom distributes its remaining 35% to them, at the rate of one Vodacom share for every Telkom share they hold.

Telkom was trading at about R113 yesterday, giving it a market capitalisation of R59bn. Vodacom is likely to trade at a higher value, as cellular operators are generally seen as having brighter prospects than fixed-line operators. MTN, the cellular rival that has hugely outstripped Vodacom thanks to its expansion throughout Africa and into the Middle East, is trading at about R108, giving it a market value of R202bn.

Although Vodafone paid R22,5bn for 15% of Vodacom, that fee carried a premium for control so it cannot be used as a benchmark for Vodacom’s listing price. The sale was also negotiated before the global economic crisis when companies were trading at far higher values.

Analyst Irnest Kaplan values Vodacom at between R70bn and R80bn, but would not speculate on the price at which its shares are likely to trade. The market would determine the price on the day, said Vodacom’s chief communications officer Dot Field.

Belated legal action to scupper its JSE debut has not prevented Vodacom from planning a listing day celebration. The Congress of South African Trade Unions (Cosatu) served papers on Vodacom, the Independent Communications Authority of SA (Icasa) and other parties in a bid to have the Pretoria High Court review and set aside Telkom’s sale of 15% and the unbundling of 35%.

Cosatu has not explained why it left its action so late, nor proposed any other way of ending the unhappy relationship between Vodacom and Telkom, which has stifled the growth of both companies. One of Cosatu’s objections is that Vodacom is a cash cow that is now falling into British hands as Vodafone will own 65%.

Field said the application was not a request for an interdict and was not set down as a matter of urgency. “Given that this matter will be the subject of court proceedings, Vodacom declines to make any further comment at this stage,” she said.

Yesterday Cosatu said it “noted with disgust” a decision by Icasa not to intervene and halt the sale of Vodacom, even though there was no public consultation on the deal. Cosatu may now apply for an urgent interdict to stop the listing, it said.

It may also call for a total boycott of Vodacom by lobbing political parties and unions to defect to other operators if the listing goes ahead.

Vodacom CEO Pieter Uys has previously said the listing would give investors direct access to a well established communications company that could maintain its lead in its markets and expand profitably into new products, services and places.

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Vodacom will be in Top 40 when it lists