Nigeria Vodacom bid piques interest

ALTHOUGH A SEEMINGLY left field, last-minute proposal to merge Telkom’s 50% stake in Vodacom with 100% of Nigeria’s second biggest mobile operator Globacom seems unlikely to succeed, given the advanced stage of talks for Vodafone to assume control of Vodacom, the prospect has piqued the interest of the fund management community.

Some want to see more detail of the Mowana Consortium’s bid before Telkom goes ahead with its plan to sell 12,5% of its stake in Vodacom to Vodafone for R18,75bn (which values Vodacom at R150bn) and unbundle the rest of its shares, which would see Vodacom listed on the JSE.

The latter talks are believed to be at a very advanced stage, particularly after numerous fund managers put pressure on Telkom’s management to unlock value quickly by running with the deal.

However, the Mowana transaction could feasibly see the creation of a pan-African mobile giant rivalling MTN in scale, although not with as big a spread of operations. Apart from Nigeria, Globacom also has operations in Benin and Ghana, while Vodacom operates in the Democratic Republic of Congo, Tanzania, Mozambique and Lesotho.

Fund managers believe the new proposal could create much more value for shareholders than the original Vodafone proposal would. One fund manager said Vodacom shares would naturally trade at a discount on the JSE if control vested with Vodafone and minorities had no control over its strategic direction.

He also said if Vodafone saw value in the deal that could create an even more compelling operation; particularly if it added its 50% of Vodacom into the mix, plus its African operations, and took a stake in the combined entity. Vodafone has African operations in Egypt, Ghana and Kenya.

It seems the consortium hasn’t included Telkom’s fixed line business in its opening gambit. But you wonder if that might also not make sense should the Vodacom leg of the transaction prove to be a possibility, given Telkom’s leadership in the SA fixed line market and fledgling Nigerian operation, Multi-Links.

Telkom issued a Sens announcement at end-August in response to a press report, simply saying it had received a number of enquiries and expressions of interest regarding one or more components of its business. But it hadn’t held any other discussions in relation to those and would let the market know if that changed.

So it initially seemed highly unlikely that the Mowana bid had come in time to be considered seriously. However, if it receives the support of SA’s fund management community, then Telkom may be forced to put the Vodafone deal on hold and at least investigate the value- unlocking prospects of the new deal.

Finweek