Telkom offloads Vodacom

It must be divorce season. First Mosiuoa Lekota announces his departure from the ANC and now Telkom has announced that they’re separating from mobile partner Vodacom.

At a press conference today in Melrose Arch, Johannesburg, Telkom CEO Reuben September announced that Telkom had accepted Vodafone’s offer of R22,5-billion for a further 15% stake in Vodacom.

Vodafone and Telkom are joint 50% shareholders in Vodacom, so the proposed transaction will see Vodafone become the majority shareholder. The remaining 35% owned by Telkom will be listed on the Johannesburg Stock Exchange and unbundled to Telkom’s shareholders.

The government will receive a 13,8% share in Vodacom, while the Public Investment Corporation will get a 4,6% share and the rest of Telkom’s shareholders will receive 16,6%.

September confirmed that the government will be locked in for twelve months from the completion of the transaction and will have to hang on to at least 10% of its shareholding during this time.


Telkom expects the deal to be concluded by May or June next year, once the necessary shareholder and regulatory approval has been sought.

September stressed that the deal would unlock significant value for Telkom shareholders as Telkom’s fixed-line business has been undervalued while it clung on to its 50% stake in Vodacom.

Telkom’s proceeds of the deal will be R22,5-billion minus Vodacom’s attributable debt of R1,55-billion, which equates to R20,95-billion.

This will be subject to capital gains tax and the remaining profit will be divided in two. Half will be paid back to Telkom shareholders as a special dividend and the other half will be used to finance its future expansion plans.

‘Our approach will be to utilise the retained proceeds prudently with the aim of ensuring that Telkom remains an attractive and strongly competitive company,” says September.

Telkom is currently looking to go it alone in the mobile space and September reiterated this approach at the press conference, insisting that Telkom would be rolling out a wideband CDMA wireless network that they would use to target corporate and high-end residential clients.

September also said that Telkom would be looking signing roaming agreements with other established mobile partners in South Africa to augment their mobile network rollout.

Many analysts have expressed skepticism at Telkom’s ability to make a success of going it alone in the mobile space and have questioned how Telkom will survive without the Vodacom cash cow.

The deal will also allow Vodafone to use Vodacom as its arm to expand into Southern Africa, excluding Kenya, where Vodafone already operates.

Vodacom already has operations in numerous African countries with very low mobile penetration such as Tanzania (20%), Mozambique (16%), Lesotho (26%) and the Democratic Republic of Congo (12%), which are seen as huge growth areas for Vodafone.

Telkom, on other hand, is already operating as a fixed and mobile player in Nigeria with their Multilinks venture and they would be looking for similar opportunities in Africa.

September says that Telkom will be eyeing a number of new mobile licenses that will become available in numerous African countries, which will probably mean that we will see Vodacom and Telkom going head to head in Africa.

Vodafone’s chief executive Vittorio Colao says that it is delighted to be increasing its shareholding in South Africa’s leading mobile player.

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