Vodafone gets a grip

HELLO: Vodafone's chief executive Vittorio Colao. 06/11/08. © Unknown.
HELLO: Vodafone's chief executive Vittorio Colao. 06/11/08. © Unknown.

Zweli Mokgata

Zweli Mokgata

After months of negotiations, Vodafone will finally take control of Vodacom.

Vodafone Group, the world's biggest mobile phone group by revenue, will buy a further 15 percent stake for R22,5 billion of South Africa's biggest mobile phone group from Telkom, putting an end to the dysfunctional love triangle.

Vodacom, which was owned equally (50 percent each) by Telkom and Vodafone has long been stifled by a shareholders' agreement that prevented the company from meaningful expansion into Africa.

Despite the company being the first to launch a mobile consumer service, it has been overtaken in the rest of Africa by MTN, which now operates in 21 countries on the continent and in the Middle East.

The deal is subject to approval by 75 percent of shareholders, the competition authorities and the Independent Communications Authority of South Africa.

It gives the UK-based cellular group a controlling 65 percent stake in Vodacom and will allow Vodacom to list on the JSE.

Telkom chief executive Reuben September said yesterday: "The retained portion of the proceeds from the disposal will accelerate the development of our mobile and data strategies, while also allowing us to selectively expand our geographic presence."

Telkom will distribute 50 percent of the cash back to its shareholders and retain the remainder for investment projects that September said would be "disciplined".

He said he expected the entire process, including the dividend payment, to be completed in the first half of 2009.

The deal is expected to allow both Vodacom and Telkom the freedom to operate in all geographies providing all possible services.

The previous shareholders' agreement prohibited Vodacom from expanding into countries where Vodafone was active.

That limited the number of locations to five countries.

Also, Telkom was not allowed to provide mobile services in African countries south of the Equator in competition with Vodafone. The arrangement was a source of a lot of tension.