VODACOM'S TOUGH CALL AFTER BELATED EXPANSION NOD

Telecoms

There is a bittersweet tinge to the confirmation that Vodacom finally has shareholder approval to go forth and multiply. For years Vodacom has watched in frustration as rivals MTN, Celtel and others enjoyed massive growth by setting up cellular networks in African countries that nobody else had bothered to tackle.

Eventually, CEO Alan Knott-Craig admitted that when its 50% owner deigned to end the constraining shareholder deal that thwarted its ambitions, it would probably be too late. Nigeria, boasting Africa's largest pent-up demand, is already fought over by four players. Every country except Ethiopia has at least two networks, and Middle Eastern predators waking up to Africa's potential have pushed up the cost of acquisitions to unjustifiable highs. Nevertheless, Knott-Craig is still prepared to have a go.

And Vodafone and Telkom clearly believe in his abilities, as his contract has just been extended to 2009.

Whether the belated encouragement to head north will achieve much is debatable. Knott-Craig hankers after buying a regional player, but if such a company is up for sale, oil-rich Arabs will be sniffing around too. And he will not jeopardise sound economics for the sake of glory. This may restrict Vodacom to smaller acquisitions of players in individual countries.

To hedge its bets, Vodacom is paying huge attention to improving its data and mobile TV services, believing that mobile TV will ultimately become the second-biggest revenue generator after voice calls.

Meanwhile, shareholders Vodafone and Telkom have agreed to dilute their stakes so Vodacom can gain much-needed black shareholders Bidders are likely to include a group of black hi-tech professionals led by Nkenke Kekana, a former Telkom official and former chairman of the parliamentary communications committee. Another potential bidder is Telkom's former chairman Nomazizi Mtshotshisa, who just resigned with two years of her contract still to run -- possibly a nicely timed move freeing her to come back as a black investor in Vodacom.

Business Day