Mergers, Acquisitions and Financial Results

UK mobile phone firm Vodafone will invest USD250 million in a subsidiary of South Africa’s Vodacom with the aim of jointly buying the Nigerian cellphone group EWN, sources at EWN said. Vodacom International Holdings, a wholly-owned subsidiary of Vodafone’s 35-percent held Vodacom, was given board approval last week to take a majority stake in Econet Wireless Nigeria (EWN) for USD230 million in cash.

However, under a shareholders’ agreement made at the time Vodacom was formed, Vodacom cannot pursue business opportunities north of the equator, a Nigerian telecommunications official told Reuters.

Vodacom International, incorporated in Mauritius, was set up by Vodacom in 2001 to spearhead its drive into Africa. It has interests in Lesotho, the Democratic Republic of Congo (DRC), Tanzania and Mozambique.

"When the opportunity in Nigeria emerged, Vodacom asked Vodafone to waive the provision and they refused, saying they would like to pursue the opportunity directly," the official said, adding that Vodafone then agreed to pursue the EWN purchase jointly with Vodacom International.

He said the USD250 million injection would also give Vodafone a greater say in Vodacom International’s interests elsewhere on the continent. "Vodafone will invest USD250 million in Vodacom International, becoming a significant shareholder," a senior EWN source from Nigeria’s commercial city Lagos told Reuters.

It was not immediately clear whether Vodafone’s investment was direct equity and what it percentage of Vodacom International it would hand Vodafone. A Vodacom spokesman in Johannesburg told Reuters he was not aware of such a deal.

Vodafone was not immediately available for comment. When asked about the shareholder agreement last week, a spokesperson for the firm declined comment.

Vodafone has previously said it was not in the market for new acquisitions and the latest move would therefore appear to signal a change in strategy, telecoms analysts said.

Even with the Vodafone support, Vodacom’s bid still faces challenges. The deal has been opposed by two of EWN key shareholders who say the meeting at which approval was given was not properly constituted.

The shareholders, Johannesburg-based Econet Wireless International and First Bank of Nigeria are seeking a court sanction to halt the takeover. Vodacom’s main shareholder is South Africa fixed-line operator Telkom, which has a 50-percent stake in the firm.

Vodacom posted earnings before interest, tax, depreciation and amortisation of 6.7 billion rand ($965.4 million) in the year to the end of March, 2003 -- an increase of 17.8 percent compared to the previous year.

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