VODACOM HEADS OFF FOR NIGERIA WITH TELKOM IN TOW

Mergers, Acquisitions and Financial Results

Vodacom Group has dragged along its parent company, Telkom, Africa's largest telephone group, in its second attempt to enter the Nigerian cellphone market after the botched bid for a controlling stake in V-Mobile, previously known as Econet Wireless Nigeria. Telkom said lst week that it would look at the opportunity created by Nitel, Nigeria's fixed-line network operator, which has invited expressions of interest in the acquisition of the business. Nitel also owns a cellphone company, M-Tel, which could be acquired by Vodacom.

Belinda Williams, Telkom's investor relations executive, said: "We will certainly look at the opportunity to make a bid for Nitel, but we have to evaluate what it is offering." Asked whether Telkom's balance sheet would be ring-fenced from exposure to the Nigerian market, Williams said it would be premature to comment. Telkom is understood to be interested in acquiring a strategic equity partner stake in Nitel, rather than a controlling stake.

"We do not want to acquire fixed-line licences, because they come with heavy licence conditions," Williams said. Telkom's priority was to open the Nigerian market for Vodacom through V-Mobile, Williams said. Khulekani Dlamini, a telecoms analyst at Investec Asset Managers, said: "We believe there is an opportunity for Telkom to deploy its great cash flow in Nigeria either through Nitel or V-Mobile.

"V-Mobile would be our preferred entry point due to the fact that ex-Vodacom employees work for V-Mobile."He said the other opportunity was obviously a strategic equity stake with Nitel of the same kind as Thintana consortium, SBC Communications and Telekom Malaysia had in Telkom. Vodacom has reiterated its interest in returning to Nigeria and possibly opening talks with V-Mobile.

But both Vodacom and Econet Wireless International (EWI), which claims to have a pre-emptive right to increase its stake to a controlling stake in V-Mobile, are awaiting a decision by a Nigerian tribunal between January and March next year.

Should EWI lose the case, Vodacom will have an opportunity to bid for a controlling stake in V-Mobile. Strive Masiyiwa, the founder and chief executive of EWI, said last month the battle was "almost over". He said if EWI won, it would up its stake from 5 percent to 56 percent. Telkom shares closed unchanged at R95 on the JSE Securities Exchange yesterday. The telecoms sector gained 0.52 percent.

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