Vodacom in spotlight as deal hype grows
A major realignment is expected in the local cellular industry
ACQUISITIVE French conglomerate Orange is looking to increase its footprint in South Africa — but a rumoured deal with Vodacom does not appear to be on the cards.
The local telecoms industry is abuzz with talk of a number of deals, most recently involving Cell C tying up with either Telkom or First National Bank. But the only firm deal to be announced this year was Vodacom’s plan to buy Neotel for an amount rumoured to be between R5-billion and R10-billion.
US-based AT&T is wooing Vodafone for a takeover, which has fuelled speculation that the company would cut loose Vodafone’s emerging-market assets and focus on Europe.
Considering that Vodafone owns 65% of Vodacom, worth R122-billion at today’s price, any such deal would be immense in rand terms.
Speculation has mounted that Orange is the most likely bidder for Vodacom. Other names touted include America Movil, the Mexican telecoms company owned by Carlos Slim, and China Mobile.
But Sebastien Crozier, CEO of Orange subsidiary Orange Horizons, told Business Times this week that there was no truth in this. “There have been no discussions about this.”
This is despite the fact that Orange is looking to extend its reach into emerging markets, with Africa — including South Africa — as a major hunting ground. It has already pushed its annual revenue growth in the Middle East and Africa to 4.1%, due largely to its operations in Mali, Guinea, Côte d’Ivoire and Senegal.
A major stake in Vodacom would fit neatly into Orange’s plans because of Vodacom’s operations in Botswana, Tanzania, the Democratic Republic of Congo, Mozambique and Lesotho, as well as South Africa.
But Crozier says it is eyeing spectrum that will become available after Vodacom finalises its purchase of Neotel. In September, Vodacom said it was in talks to buy Neotel, which is controlled by India’s Tata Communications but which has about R5-billion of debt. If it goes through, it is unclear whether Neotel will be able to take its much-prized broadband spectrum with it — and that is something Orange wants very badly.
Crozier said this spectrum would enable his company to develop a mobile virtual network operation.
Vodacom already holds 50% of this market, so it could be considered anticompetitive to allow it to keep the spectrum should the Neotel deal be given the green light.
“We would be able to create innovations on products and prices [using this spectrum],” he said.
Should the spectrum become available, Orange would have to bid against the likes of Wireless Business Solutions, which operates iBurst, and other new rivals.
Assuming Orange gets access to the spectrum, it would then be able to set up shop here as a mobile operator by renting infrastructure capacity from the existing operators — which include Vodacom, MTN and Cell C.
Orange could also then develop its own product range and use the financial muscle of the parent company to carry it through a few years of
We would be able to create innovations on products and prices using this spectrum
losses as it woos customers.
In January, Orange created a virtual presence in South Africa, selling specific products.
It took up a physical presence in June through three Nashua Mobile stores that made available Orange products for travelling customers to cut roaming charges. Orange also has a business unit serving high-profile companies in the mining and petroleum industry.
The rampant speculation comes amid a series of global mega-mergers and divestments that are also likely to affect local ownership structures — possibly clearing a path for a new entrant.
Vodafone is in the process of selling its stake in Verizon — the largest US mobile network — to its joint venture partner, Verizon Communications.
The deal, which will be concluded next year, is worth a jaw-dropping $130-billion.