On the Money – In Brief

Mergers, Acquisitions and Financial Results

* Vodacom may sell its 51% stake in Vodacom Democratic Republic of Congo (DRC), if a long-running shareholder dispute is not resolved in the next six months, reports South African news blog www.itweb.co.za. Vodacom has been fighting with fellow shareholder Congolese Wireless Networks (CWN), which owns the remainder of the company, for several months over a funding agreement between the shareholders. CWN accused Vodacom of forcing its DRC operation to pay up to USD180 million to satisfy loan agreements with ‘uncommercial terms and conditions’. It also accused Vodacom International of plundering the Congolese operation of capital.According to Vodacom CEO Pieter Uys the matter is still in arbitration at the International Trade Commission, but talks are continuing between the parties. However, should the impasse not be resolved within the next six months, Vodacom will look at selling the unit. Vodacom DRC had 3.4 million subscribers at the end of June 2010.

* South Africa-based Vodacom Group has reported consolidated revenues of ZAR28.67 billion (USD4.19 billion) for the six months ended 30 September 2010. This figure represents an increase of 9.9% year-on-year. EBITDA for the period grew 8% to ZAR3.35 billion, whilst net profit crashed 98.4% to ZAR59 million, as a result of ‘group finance charges’ of ZAR1.11 billion and taxation of ZAR2.35 billion. Vodacom has indicated that the large tax bill is primarily down to the reversal of a deferred tax asset in the Democratic Republic of Congo during the previous reporting period.Of the group’s revenues, mobile voice traffic was responsible for the lion’s share of the takings, generating ZAR15.48 billion, whilst mobile interconnection fees contributed ZAR4.46 billion. Mobile data and mobile messaging were responsible for ZAR2.03 billion and ZAR1.55 billion respectively. Vodacom’s domestic unit, Vodacom South Africa accounted for ZAR24.37 billion in sales, or 85% of the group’s total 1H revenues.

* Egyptian telecoms group Orascom Telecom has unveiled its financial results for the three months ended 30 September 2010, revealing a return to profit. Orascom posted a 1.6% year-on-year increase in revenues, Djezzy reported a customer base of 14.9 million, up 1.3% y-o-y, but down 1.5% against the 15.1 million it had at end-June 2010. Group revenue stood at USD3.12 billion in the third quarter of 2010, up from USD3.07 billion, with all of the group’s units reporting revenue growth except Djezzy. The Algerian unit, which remains Orascom’s largest contributor to group turnover, saw revenues tumble 8.9% against 3Q09, which it said was primarily the result of a ban on advertising on government-owned TV channels. Group earnings before interest, tax, depreciation and amortisation (EBTIDA) meanwhile fell by 0.8% against the same period a year earlier to USD1.33 billion, with Djezzy once again responsible, having reported a 13.2% decline in EBITDA for the three-month period. Orascom posted a net profit of USD934 million in its third fiscal quarter of 2010, following a one-off gain involving its jointly-owned Egyptian operator MobiNil; net profit from continuing operations was USD112 million, up from a loss of USD108 million in the previous quarter.

*Boston-based wireless communication site operator American Tower Corp has agreed to buy 3,200 cell towers from Cell C, South Africa’s third-largest cellco by subscribers. American Tower will buy 1,400 of Cell C’s existing towers and as many as 1,800 additional towers that are already under construction, or mooted for future development. Johannesburg-based Cell C will be the ‘anchor tenant’ for each tower. The sale is expected to pave the way for a more competitive wireless market, as it will allow smaller players to lease access to the national tower network at competitive rates. The transaction, which is worth a reported USD430 million, is expected to close in early 2011.

*Reuters quotes Egyptian tycoon Naguib Sawiris as saying that there is ‘at best’ a 50% likelihood of completing the proposed USD6.6 billion merger between Russian mobile group Vimpelcom and Orascom Telecom, the Cairo-based cellular group of which he is chairman and controlling shareholder. Sawiris said Norway’s Telenor – which owns nearly 40% of Vimpelcom – was ‘not motivated’ to push through the merger, which could be hindered by an ownership dispute with the Algerian government as well as anti-monopoly and/or foreign ownership issues in Pakistan and Bangladesh (two countries in which both Telenor and Orascom have subsidiaries).
The Algerian government is demanding hundreds of millions of dollars in back-taxes from Orascom’s local unit Djezzy – the group’s largest single revenue earner – and wants to nationalise the operator, at a price expected to be low enough to derail Sawiris’ USD6.6 billion agreement to sell his holding company Weather Investments' majority stakes in Orascom – excluding two of its eleven mobile operations worldwide – and Italian telco Wind to Vimpelcom.

* New Generation Telecommunications, the consortium which emerged as the preferred buyer for state-run incumbent telco Nigeria Telecommunications (NITEL) in February 2010, has been given an additional 20 days to pay a USD750 million bid security for the ailing operator, the Economic Times reports. Last month President Goodluck Jonathon approved the consortium’s bid of USD2.5 billion for a 75% stake in NITEL and its mobile arm M-Tel, after an eight month delay. New Generation – which comprises Minerva Group of Dubai, Nigeria’s GiCell Wireless and technical partner China Unicom – was asked to pay a bid security of USD750 million within ten days from 25 October and was given 60 days to pay the remaining USD1.75 billion. However, last week GiCell requested a 30-day extension to the deadline for the bid security, after the consortium failed to come up with the funds in time. Usman Gumi, GiCell’s managing director, said New Generation had missed the deadline because some of the consortium’s financial partners had developed ‘cold feet’ since the firm was announced as the winning bidder back in February.

* In the first nine months of 2010 Maroc Telecom announced that its consolidated revenues increased by 5.8% to MAD23.7 billion (USD3.0 billion), whilst earnings from operations before depreciation and amortisation (EBITDA) rose by 5.1% to MAD14.0 billion. Its statement added that earnings from operations (EFO) in the three quarters to the end of September climbed 3.5% y-o-y to MAD10.5 billion, or a 44.3% operating margin.In 9M10 Maroc Telecom’s fixed line, mobile and broadband operations in Morocco generated net revenues of MAD19.6 billion, up 1.9% versus the corresponding period in 2009. Domestic nine-month EFO stood at MAD9.6 billion, up 0.9% y-o-y.* Zimbabwe’s largest cellco by users, Econet Wireless, has posted a 79% year-on-year rise in its fiscal first-half revenues to USD236 million in the six-month period ended August 2010, boosted by unprecedented subscriber growth and the continued recovery of the country’s economy.