Lesley Stones
7 November 2008
Johannesburg — FOR once Vodacom and Telkom agree on something: they both want to become Africa's biggest supplier of voice and data services.
Unfortunately that thrusts them in direct competition to one other, since there is room for only one at the top. But at least those future clashes as they fight for market dominance mean their years of bickering will not end just because Telkom is finally shedding its 50% stake in the mobile operator.
"We are seeking to be Africa's leading fixed and mobile provider. The ability for us to provide mobile services in SA and across Africa is a very exciting future," Telkom CEO Reuben September said yesterday.
In a statement echoing those sentiments, Vodacom CEO Pieter Uys said: "We have a growth strategy to become a total communications provider across the continent."
Yet there may be room for both to make massive progress abroad. Africa's largest players, MTN and Zain, are aggressively rolling out their networks as there is still vast room for growth. The penetration rate for cellphones is growing rapidly but from a very low base, while Africa's internet penetration stands at less than 1%. Vodacom and Telkom alike want to provide those countries with voice, e-mail and internet access.
The deal for Telkom to sell 15% of its stake in Vodacom to Vodafone for R22,5bn and to unbundle its other 35% to its own shareholders will make the mobile operator majority-owned by the UK operator.
"We are becoming part of the biggest mobile company in the world with operations in 27 countries and partnerships with 40 networks around the world," Uys said. Crucially, the government has insisted that Vodafone uses the local company to drive any further expansion into sub-Saharan Africa. That important clause not only gives Vodacom its long-craved freedom to expand -- it practically makes it compulsory. Vodafone is targeting Africa as a key market for growth, since its European home turf is almost saturated.
"Africa is an important area for growth for Vodafone," said Morten Lundal, CEO for central Europe and Africa. "We have promised the government that Vodacom must be our investment vehicle for sub-Saharan Africa, except Kenya and Ghana where we already are."
Lundal said it was not a difficult promise to make. "Vodacom is more prepared and able to manage African countries than we would have been from sitting in England, so Vodacom will be an effective way for us to expand."
The companies had their "business development eyes open" but would not discuss specific plans to enter more countries, he said.
Lundal said he was happy the government was obliged to hold at least 10% of Vodacom for a year after its listing, as that would add stability.
Stability will also prevail in Vodacom's management team, with Lundal saying he was happy with the local managers and had no plans to impose changes.
It is too early to say how much Vodacom will list for, and not only because of market volatility. The R22,5bn that Vodacom is paying for 15% values the company at R150bn, but its bid carries a premium for control that is unlikely to be reflected in the listing price.
Lundal doubted that the unions would pose any resistance to the historic deal, despite the Communication Workers' Union previously slating a sell-out to the British. Staff meetings had been held and the workers appreciated that being part of a far larger global group would be good for them, he said.
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