Vodafone, Vodacom alliance explore Nigeria market stakes through local subsidiary, Gateway Communications

Mergers, Acquisitions and Financial Results

World’s largest mobile phone company, Vodafone of UK and South Africa’s mobile phone company that it controls, Vodacom, are jointly intensifying their search for stakes in the Nigerian telecoms market which they hope to realise through their local subsidiary, Gateway Communications.

CEO, Vodacom, Pieter Uys, has hinted that the duo are looking into telecoms market stakes in Nigeria, particularly WiMAX services in an ambitious bid stepped up by Vodafone to use the South African Vodacom Group as inroad into the African market through acquisitions.

Both companies have made futile bid to enter the Nigerian market through acquisition of stakes in local operators, the most celebrated being Vodacom’s deal with Econet (now Zain Nigeria). It pulled out of the deal under controversial circumstances citing corporate governance issues with its local partners.

Last December, the Vodacom Group announced the acquisition of acquisition of the carrier services and business network solutions subsidiaries of Gateway, Africa’s largest independent provider of interconnection services via satellite and terrestrial network infrastructures for both African and intercontinental telecoms companies. Gateway also provides an extensive range of high quality, end-to-end connectivity solutions to multinational corporations operating across Africa.

Vodacom had said that acquisition of Gateway, which has solid footprint in Nigeria, offers multiple strategic benefits, among others, of accelerating its international expansion and, "broadens Vodacom’s international presence in key markets throughout Africa, especially Nigeria, and creates a platform for future expansion."

“If you look at the world there aren’t many growth opportunities around; Africa is one of them,” Uys said. “All markets in Africa offer potential for consolidation.” Vodafone “has committed to use us” to enlarge its sub-Saharan business and “support us” on potential acquisitions, Uys said in an interview with Bloomberg.

Growth continues to be sustained in the Nigerian telecoms market which has crossed a threshold 67million lines and market watchers are hedging their bets that opportunities are opening up for WiMAX and other technologies delivering wireless broadband and data services just as the Vodacom top shot says the duo are now keener to do business in Nigeria.

“We were never exposed to growth in Nigeria,” Uys said. “It is competitive there but through Gateway at least we are doing business,” there and “we understand the market, so when that opportunity presents itself, in whatever form, we are already there. We can act,” he said.

Gateway will allow Vodacom to bid for licences for WiMAX, he said, adding that if there’s a WiMax license for sale, “we will grab it.” Uys said the new Vodafone control is good for Vodacom adding that, “if you asked me 12 months ago I would have been more hesitant,” Uys said of his enthusiasm to be CEO of a listed subsidiary of Vodafone. “But I really like the management that is there now.” Uys said he has known Vodafone CEO Vittorio Colao for 10 years.

Discussions between the two companies on procurement and co-branding in new markets are underway, and Vodacom would “consider” re-branding itself, he said. “If it makes sense, yes we will do it.”

Newbury, England-based Vodafone has sought assets in emerging markets, making acquisitions in India, Turkey and Qatar to make up for slumping demand in its main European markets. In November, it agreed to buy an additional 15 percent stake in Vodacom from Telkom South Africa Ltd. for 22.5 billion rand ($2.66 billion), ending a 50-50 partnership and raising its stake to 65 percent.

Telkom South Africa’s remaining 35 percent stake was sold to investors and shares in Vodacom started trading in Johannesburg on May 18. Vodacom has operations in South Africa, Tanzania, Lesotho and Mozambique. Through its Gateway Communications Ltd. purchase in August, it offers satellite services in 40 African countries.

Technology Times