Mergers, Acquisitions and Financial Results

Vodacom is planning a multi- million-rand acquisition to catapult it further in the internet arena, and has set its sights on a technology group that is welcoming its overtures.

CEO Alan Knott-Craig said the deal would involve a company roughly the size of Dimension Data's local operations, but he would neither confirm nor deny whether Didata's Internet Solutions subsidiary was the target. Vodacom has already bought 10% of WBS, a wireless internet service provider, with an option to take 15,5%. But Knott-Craig said the new target was "much bigger stuff than WBS".

If the plan reached fruition it would give Vodacom a presence in far more technologies than the internet alone, he said, which widens the potential field of targets it may be wooing. One market watcher said Internet Solutions seemed the best candidate, and with Vodacom "money isn't exactly a problem". Didata has a market cap of R11,6bn, but generates 80% of its $3bn revenue from outside Africa. Listed company DataPro was also shaping up nicely as an acquisition target, he said.

The planned acquisition is a key part of Vodacom's new strategy to reinvent itself as a supplier of all telecoms services, including fixed and mobile telephony, broadband internet access and television broadcasts. Those plans were firmed up yesterday as it issued sparkling results, showing its profits have continued to soar.

Its revenue of R41,1bn for the year to March was up 21% and its net profit rose 27,6% to hit R6.6bn. It declared dividends of R5.4bn. It now serves 30.2-million customers, 23-million of them in SA. Despite that growth, the company is determined to change its profile. "We are looking for new business opportunities in SA to provide total solutions for corporates."

As the demand for everything from simple SMS messages to broadband internet surged, SA's bandwidth capacity was struggling, he said. The new Electronic Communications Act allows operators to build their own networks rather than being forced to lease lines from Telkom, and Vodacom intended to do that. A new division, Vodacom Converged Solutions, would lay fibreoptic lines in metropolitan areas this year to gain additional data capacity and end its reliance on Telkom.

"We have to become the provider of our own infrastructure to give us independence and capacity and lower costs to transmit voice and data. Fixed lines will become part of our business," he said.

Buying into WBS gave Vodacom access to a licence and spectrum for WiMax wireless technology, but true broadband demanded fixed lines, not wireless technologies. That meant Vodacom had to buy a company with fibreoptic cables in the ground, international data links and its own earth stations to receive satellite signals. "There is a company that looks attractive right now, but it's early days."

Vodacom has 139,000 people using its network to connect computers to the Internet, and 33,000 people watch its mobile television channels. Future offerings will include pay television via digital satellite in partnership with MultiChoice. It also bought into two small wireless companies , GMobile and Gogga Tracking Services, he said.

Business Day