Global cellular giant Vodafone is in talks to buy a multibillion-rand stake in local cellphone operator MTN\u2019s international operations.<\/p>\n
Business Times has established that Vodafone, the world\u2019s biggest cellphone operator by revenue, has initiated preliminary talks with MTN, after being blocked by the South African government from buying a controlling stake in rival operation Vodacom.<\/p>\n
The government wants a significant stake in Vodacom to be made available for an empowerment deal.<\/p>\n
MTN chief executive officer Phuthuma Nhleko confirmed that Vodafone was among companies that had approached him about a partnership, but said he had nothing to report to shareholders. Vodafone spokesman Bobby Leach denied that any talks were under way.<\/p>\n
The closely guarded talks could pave the way for Vodafone\u2019s expansion into parts of Africa and the Middle East, where MTN is already established.<\/p>\n
The talks were confirmed by an MTN insider and by an independent source in the South African financial services sector, who is familiar with the detail of the discussions.<\/p>\n
Business Times has been told that the proposed deal would not include MTN\u2019s local operation because that would raise competition issues. Vodafone already owns a 50% stake in Vodacom.<\/p>\n
After Vodacom, MTN is the second-biggest cellphone operator in South Africa with 14.8 million subscribers and a 36% market share.<\/p>\n
Collaboration between Vodafone and MTN would give the \u00a3 100- billion UK-based group access to African and Middle Eastern countries where MTN has established a major footprint. MTN, launched in 1994, has 61.4 million subscribers in 21 countries.<\/p>\n
Sources close to the talks said Vodafone had become increasingly frustrated by the South African government and Telkom dragging their heels over the past year on the sale of a 15% stake in Telkom, which would give Vodafone control of Vodacom.<\/p>\n
Telkom and Vodafone each own half of Vodacom at present.<\/p>\n
Vodafone, which counts soccer star David Beckham and racing driver Michael Schumacher among its brand ambassadors and claims 252 million users, is understood to be desperate to expand its operations in Africa and the Middle East.<\/p>\n
Nhleko responded cautiously this week to questions about the reported Vodafone initiative.<\/p>\n
\u201cLet me put it this way, everybody talks to us, including them,\u201d he said.<\/p>\n
\u201cThere is nothing of such a nature that would constitute a serious approach or a serious offer to the extent that we would feel compelled to go and table that with shareholders.\u201d<\/p>\n
He said MTN would be obliged to consider any serious offer presented to the board.<\/p>\n
\u201cIf somebody came and approached the company and said we\u2019d like to buy you and here is a very attractive price, my task is a very simple one.<\/p>\n
\u201cProvided the thing makes sense and it\u2019s sensible, our job is just to go and present to the shareholders and the shareholders should make up their minds,\u201d he said.<\/p>\n
Vodacom is the market leader in the Democratic Republic of Congo, Tanzania and Lesotho, and is active in Mozambique, but its further expansion into Africa is constrained by a 2004 shareholder agreement with Vodafone.<\/p>\n
Vodafone already has controlling stakes in cellular companies in Kenya and Egypt.<\/p>\n
In an interview with the UK\u2019s Financial Times in November, Vodafone chief executive Arun Sarin hinted that Telkom\u2019s delay in \u201cdeciding what kind of a company Telkom wants to be\u201d was hindering his company\u2019s expansion in Africa.<\/p>\n
\u201cThey have to decide strategically what it is they want to do. If we have a chance to buy shares in Vodacom at a reasonable price, we would be interested,\u201d Sarin said in the interview.<\/p>\n
\u201cFrankly, Africa is a big continent and we would like to be in Africa to a greater extent. We would then run our African expansion from South Africa,\u201d said Sarin.<\/p>\n
The Vodafone boss acknowledged that MTN had done \u201ca better job in expanding in Africa\u201d than Vodacom and that \u201cthey are in more places right now\u201d.<\/p>\n
\u201cBut we have a very good, solid company in South Africa and we will use that as the platform for expansion.\u201d<\/p>\n
However, political wrangling has delayed Vodacom\u2019s R7.5-billion black economic empowerment transaction and hindered Vodafone\u2019s plans.<\/p>\n
Earlier this month Business Times revealed that Bulelani Ngcuka \u2014 husband of Deputy President Phumzile Mlambo- Ngcuka \u2014 had been dumped by his business partners, who are worried that his close ties to the present government will count against them in their bid to win the Vodacom empowerment share.<\/p>\n
Last week, however, the Vodacom board instructed Ngcuka\u2019s former partners \u2014 companies headed by businessman Nkenke Kekana, former Eskom chairman Reuel Khoza and businesswoman Anna Mokgokong \u2014 to back his Amandla Omoya consortium or lose out on the deal.<\/p>\n