London-headquartered Vodafone’s offer to increase its stake from 35% to 50% in local mobile network Vodacom was on Thursday hailed as a vote of confidence in South Africa’s political landscape and economic prospects.
Global mobile giant Vodafone has offered to acquire VenFin’s 15% holding in Vodacom for an estimated R16-billion (£1,3-billion). The British group expects the deal to be closed by no later than March 2006.
“Operating from the premise that the deal does materialise, it is good news for the currency to the extent that potential capital inflow will be happening at a time when the foreign trade deficit is slowly showing signs of pressure,” RMB economist Etienne le Roux said.
“Following so soon after the Barclays/Absa transaction, it is also a sign that South Africa is becoming a preferred destination for foreign direct investment.”
Earlier this year, Cell C’s black economic empowerment (BEE) investor CellSaf sold off 15% in the cellular firm to Lanum Securities of Saudi Arabia for an estimated $180-million (R1,1-billion).
“I think this shows a vote of confidence but this indication [that foreign groups are interested in the local market] has been there for some time now. But further than that, I think this really shows that there is growing interest by cellular operators to invest in Africa’s growing market,” said a telecommunications analyst who did not wish to be named.
He added that Vodafone might be interested in increasing its stake in Vodacom beyond 50%, although this would be difficult.
The analyst expects VenFin to be delisted once the deal is finalised.
In terms of Vodafone’s proposed transaction, the British group would offer to acquire all of the VenFin shares at R47,25 per VenFin share. VenFin would then sell its entire assets and liabilities, excluding its Vodacom stake, to a newly incorporated, unlisted public company for R5-billion.
Vodafone spokesperson Bobby Leach said the deal was motivated by the fact that Africa is one of the next growth markets for the cellular sector.
However, he added, Vodacom would continue pursuing its own African growth plans while the global giant would continue looking for growth opportunities elsewhere.
Turning to broad-based BEE, Leach said the British group is involved in preliminary discussions with various possible black investors. Together with Telkom (which owns 50% in Vodacom), Vodafone is investigating avenues on a potential equity deal that could see part of the Vodacom stake transferred to BEE partners.
Leach reiterated that Vodacom would remain independent and retain its brand and name.
African Harvest’s telecommunications fund manager Saliegh Salaam said the deal could also mean that MTN Group — present in eight countries — is a candidate for takeover by a foreign player, given that it is at present without a controlling shareholder.
“If one accepts that the Vodafone valuation of Vodacom is fair, then it implies that MTN is significantly undervalued,” he said of the operator with more than 18-million subscribers and a market capitalisation of R93,7-billion.
In addition to impending deals in Tunisia and Iran, MTN looks set to venture into Botswana or Egypt where Vodafone already has operations.
At 3.01pm, MTN was up 5,85% or 311 cents at R56,31 per share, while Telkom had rallied R9,24 or 7,03% to R140,74 after hitting an all- time high of almost R144 per share earlier.
After trading at an all-time high of R46,85, VenFin was R10,35 or 28,51% higher at R46,65 per share — 60 cents lower than Vodafone’s offer of R47,25. — I-Net Bridge