Vodacom buys Gateway units for $5,1-billion

South African mobile operator Vodacom has agreed to buy most of African network and satellite services firm Gateway for an enterprise value of $5,1-billion to boost its exposure to fast-growing African markets.

Vodacom, jointly owned by Telkom and Britain’s Vodafone, said on Friday it would also make a payment of about R191-million in relation to Gateway’s high-yield bond.

Vodacom, South Africa’s biggest operator, has been trying to muscle into high-growth markets on the rest of the continent, and said the Gateway deal would expand its presence in Nigeria, Africa’s biggest cellphone market, and other countries.

The deal will also help Vodacom reposition itself as a provider of converged communication services across Africa, rather than a pure cellphone operator, the company said.

Telkom shares gained 1,87% to R142 by 7.02am GMT, outpacing a slightly weaker Johannesburg Top-40 index of blue-chip stocks.

Britain’s Vodafone, which already owns 50% of Vodacom, plans to win control of South Africa’s biggest operator by buying part of Telkom’s stake.

Gateway is Africa’s largest independent provider of interconnection services via satellite and terrestrial network infrastructure. It provides services to African and international telecom companies.

Gateway also provides end-to-end connectivity services to multinational companies operating across Africa. The deal does not include privately owned Gateway’s broadcasting business.

Gateway’s sales totalled $257-million in the year to end December. Vodacom said it expected the deal to yield cost savings but did not give a figure. The transaction is subject to approval by the South African Reserve Bank and competition authorities. UBS is advising Vodacom on the deal. – Reuters

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