4 December 2003

Mozambique: Network to be Developed with Vodacom Cash

Maputo — Most of the $260m that Vodacom expects to pump into its new network in Mozambique will come from its internal cash resources to avoid exposing the company to currency fluctuations.

If its own resources need any additional support over the five-year peak funding period, loans will be raised from South African banks to avoid any US dollar exposure. That financial arrangement will protect Vodacom from unpredictable external pressures as it launches its fifth network this month.

Vodacom will initially hold 98% of Vodacom Mozambique, said deputy CEO Andrew Mthembu. The Mozambican government requires that local partners must hold at least 25%. So far a consortium of local businessmen, trading as Emotel, has raised only sufficient cash to buy 2%, so 25% has been warehoused for them to acquire over the next four years.

The economic significance of this investment was demonstrated by the presence of Mozambican President Joaquim Chissano at the launch in Maputo.

"Your presence is a sign that we are on the right track in believing that the poverty we live in today will not last forever," Chissano said.

The president also hoped that increased competition in the sector would make communications more affordable and boost the economic activity of its citizens.

Vodacom and the president's office have come to know each other well in the 16 months since the licence was first issued. During that time they have been locked in negotiations to implement the conditions that Vodacom was promised when its $15m bid for the licence beat off three rivals.

Mthembu said the delay was caused because the state-owned fixed-line operator was cross-subsidising its cellular subsidiary, mCel, to the detriment of a potential second cellular operator.

" We had to insist that the government got involved and forced them to relook at their tariffs and separate them.

"We had to demonstrate that it didn't create an environment conducive to foreign investment. The president realised it was a regulatory requirement that prevented us from going ahead."

Vodacom's refusal to invest before the issues were resolved may pave the way for other South African firms considering pumping money into Mozambique.

"The government will continue to promote a legal environment more favourable to private investment," Chissano pledged.

Clive Tarr, the MD of Vodacom Mozambique, said: "With Maputo just 55 minutes from Johannesburg by air, it would be crazy for any South African company with international ambitions not to be here."

With its network roll-out now under way, Vodacom was promising to deliver innovative packages tailor-made to "win the hearts and minds" of customers, Mthembu said. Its goal is to win 40000 customers in its current financial year, and gain a 45% share in three years.

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