Vodafone Offers R19bn for Stake in South Africa’s Vodacom

Telecoms

The shake-up in SA's telecoms sector intensified last, with the UK’s Vodafone offering Telkom R18.75bn for a 12.5% stake in Vodacom. The offer follows local black investment house Mvelaphanda saying it wanted to pick up Telkom's fixed-line operations for R90bn. Before that it was MTN and Oger….With this kind of bid traffic, it’s amazing that anyone in Telkom’s senior management team find time to actually run the company.

The transactions could see Vodacom being unshackled from parent company Telkom and listed as a separate entity through interlinked bids worth R108bn to sever Telkom's fixed-line assets from its cellular operations.

The flurry of activity around Telkom signals further consolidation in SA's telecoms sector after sub-Saharan Africa's biggest mobile phone operator, MTN, said last week it was in talks with India's Reliance Communications over a transaction to create a $66bn emerging markets telecoms group.

The government owns 38% of Telkom and the Public Investment Corporation holds 15%. Last week, the Communications Department said it had noted the cautionary from Telkom and awaited details.

In October, the department said it "supported in principle" discussions taking place for Telkom to sell some of its assets to MTN. But Communications Minister Ivy Matsepe-Casaburri did not clarify if the government also endorsed a related plan to sell more Vodacom shares to Vodafone, and the potential deals collapsed before the minister was forced to take a stance.

Vodafone has long wanted to raise its 50% stake in Vodacom and oust Telkom as the joint owner so it can control the cellular operator's future. It proposes to buy 12,5% from Telkom on condition that Telkom relinquishes the remaining 37,5% by unbundling those shares to Telkom's shareholders.

Vodafone does not want to buy 100% of Vodacom as it would quickly have to resell part of the South African operations to black investors in an empowerment deal that would probably happen at a discount.

A consortium led by Mvelaphanda has offered a reported R90bn for Telkom's other assets, in a deal that is dependent on Telkom agreeing to shed its stake in Vodacom.

Telkom describes the bids as "independent", though they are clearly linked. " I think the Vodafone thing is happening," said one internal source. "Telkom has to do something and the only thing it can do is sell Vodacom to Vodafone, then someone else buys what's left."

Business Day