Vodacom going places in Africa with Safaricom
Kenya acquisition doubles foreign operations
ACQUISITION opportunities are opening in Africa for Vodacom Group as telecommunications assets become more affordable, the JSE-listed group’s CEO, Shameel Joosub, said this week at the presentation of its annual results for the year ended March 31.
Joosub made the comments on Monday, just hours after Vodacom announced it was acquiring an effective 34.9% stake in Kenya’s Safaricom in a share deal with parent Vodafone worth about R35-billion. The deal more than doubles the size of Vodacom’s international operations, making it a more formidable player on the continent next to rival MTN Group.
The acquisition sees Vodacom buying 87.5% of Vodafone Kenya from Vodafone Group, subject to approval. Vodafone Kenya’s only asset is a 39.9% interest in Safaricom. Vodafone Group will retain 12.5% of Vodafone Kenya, for an effective 5% stake in Safaricom.
Joosub hinted that the deal to acquire 35% of Safaricom — Kenya’s largest cellphone operator with 71% market share — was just the start of acquisitions in Africa. He downplayed suggestions that the deal could foreshadow a privatisation by the Kenyan government of its stake in Safaricom. It also holds 35% of Safaricom’s equity.
Joosub said there was no indication that the government was interested in selling.
Analysts say the obvious next target for Vodacom is Vodafone Ghana, the West African nation’s second-largest operator after MTN. That deal, however, would not be anywhere near the scale of the Safaricom one.
Joosub said other assets on the continent had become more reasonably priced in recent years, but qualified that by saying Vodacom was interested only in markets where it would have scale (adding 10 million or more customers) and where the acquisition targets were market leaders or significant players.
He emphasised that Vodacom was not interested in buying “distressed assets”, but wanted good-quality investments it could grow.
“I think there are some other opportunities in the African context that are becoming more reasonably priced than they were a few years ago,” he said. “We are keeping a watchful eye on some of those and there’s some renewed interest because prices have come down a couple of notches over the past few years.”
But which markets might Vodacom be interested in specifically?
Joosub gave no clues during his presentation, but Africa Analysis MD Dobek Pater believes Ethiopia is a big opportunity given that the market has been monopolised by a stateowned entity for years. But it is only an opportunity if the gov- ernment opens up the market.
“Ethiopia is probably the main [opportunity in Africa] due to relatively low penetration levels and lower use of IT services, and the fact that it has been effectively monopolised by government entities,” he said.
Although the Ethiopian mobile market was relatively well penetrated at 60%, there was room for competition and winning customers away from the incumbent, Pater said. There was also an opportunity in the broadband market — mobile and fixed — with fixed internet prices too high.
The market was also looking for good-quality IT and network management services for the business sector in the main urban areas, Pater said.
“Angola is an opportunity too, but there is also a stranglehold there by the government to an extent, although there is some private sector competition. However, this market was mainly buoyed by high oil prices and, with lower oil prices, the economy has become less stable and growth prospects have diminished.” Not only South African operators are interested in investment. Chinese, Indian and even some European operators, such as France’s Orange, are watching developments closely.
“Certainly, South African operators would be interested in new acquisitions in Africa, as their home market becomes
The obvious next target for Vodacom is Vodafone Ghana
more congested and competitive. They often know African markets [better than operators from other regions] and [the assets] are normally less expensive than buying highervalue developed-market assets,” Pater said.
African telecoms assets might become cheaper on a per-customer basis, but it depended on which assets were being considered — mobile versus fixed operators versus IT services players, for instance.
In the case of mobile operators, the cost per customer of assets for sale might have
Opportunities in Africa are becoming more reasonably priced
dropped, but this could be due to decreasing average revenue per user, especially for more traditional 2G/3G operators. This would be the inevitable result of competition, expansion of subscriber bases into lower socioeconomic groups, and the multisim phenomenon, in which consumers used more than one sim card and switched between networks, Pater said.