Extreme makeover
SET IN MOTION WITH THE launch of Vodacom Business in February, Vodacom has aggressively set about diversifying its business from more than just a mobile operator to become a so-called converged information and communications technology (ICT) player. CEO-designate Pieter Uys – who officially takes over from Alan Knott-Craig next month, but is already acting as the public voice of Vodacom – recognises there’s probably 18 to 24 months of good growth left in South Africa, its key market. And he wants to avoid the spectre of single-digit growth that could result from simply staying put while saturation sets in.
Its most recent US$700m (roughly R5,4bn) buy – Gateway Communications – is a pivotal step towards broadening its goal and reach in Africa. It immediately gives Vodacom a foothold in a coveted market, such as Nigeria, among the 13 countries where Gateway has a physical presence. But although it doesn’t have infrastructure in all of them, Gateway has clients in more than 40 countries – immediately making Vodacom the operator with the most reach in Africa – an attribute that will no doubt make arch-rival MTN cringe.
Gateway CEO Peter Gbedemah says its strategy has long been to grow in its key markets and open in new ones, and its connection with Vodacom will help it do just that. Its founders liked Vodacom’s ambition and style when it approached Gateway.
In case the deal caught you off guard – it was something of a surprise – and left you wondering what Gateway really does, allow me to fill in some gaps. It provides inbound connectivity for international telco operators, as well as terrestrial and international connectivity for African operators. Most of the connectivity Gateway provides is via satellite, given the shortage of infrastructure in Africa. That’s particularly important in hard-to-reach regions – for example, the vast stretches of land between cities in the Democratic Republic of Congo.
But while satellite should remain pervasive in Africa, Gbedemah says it also delivers capacity using fibre where that’s available, and would consider building (or buying) the necessary infrastructure to deliver its applications.
And those aren’t limited to cellular backhaul connectivity. Gateway also provides solutions for business networks, Internet connectivity and e-commerce, which fits perfectly with part of what Vodacom’s trying to do with Vodacom Business.
Uys says Vodacom plans to use Gateway’s existing operations as a base from which to launch other services it offers. Gbedemah says that seems very possible to achieve.
Although each country would have its own regulatory issues, Uys has said previously that Vodacom needs to broaden its outlook from pure GSM to other licence categories, such as unified licences, which enable operators to provide voice and data (similar to that which Telkom subsidiary Multi-Links offers in Nigeria).
Vodacom will keep the brand and run Gateway as a separate entity and retain its management team. Gbedemah is happy with that and, together with Gateway’s founders, is keen and committed to remain involved in building the business they started.
The Gateway deal is even more attractive to Vodacom precisely because it doesn’t have a large operation in SA. Major local deals would naturally incur the wrath of SA’s competition authorities and so would arguably be a waste of time and resources for Vodacom.
However, Vodacom also recently concluded at least one local acquisition in an area where that wouldn’t be the case: managed services. Uys says the StorTech deal (a 51% stake) would complement its organic build that Vodacom Business has undertaken. And it seems likely to make a few more such “IT” acquisitions down the line.
Finweek
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