Vodacom to list on JSE in May

South Africa’s biggest cellphone operator, Vodacom, will list shares in Johannesburg in May as part of a deal that will give Vodafone majority control and pave the way for faster expansion into Africa.

Vodacom will list on May 5 after joint-owner Telkom distributes a 35% stake to shareholders and finalises a deal selling a further 15% to Vodafone, giving it 65% and ending a shareholder pact that stifled growth.

Vodacom chief executive Pieter Uys declined to put a price on the stock, but one analyst forecast a value of about R85-billion, which comes at a sharp discount to the multiple Vodafone is paying for control but would still make it one of the biggest listings in South Africa.

Uys acknowledged times were tough for listings, but said Vodacom would appeal to investors looking for solid dividends—it will pay 40% of its maiden headline earnings—and exposure to markets with big growth potential.

Telkom shareholders will get one Vodacom share per Telkom share and its biggest investor, the South African government, has vowed to hold a 10% stake for at least a year.

Vodacom runs mobile networks in five African countries and bought Gateway Communications last year to beef up its data business, but has struggled to keep pace with the rapid expansion of rival MTN into Africa and the Middle East.

Investors hope the end of a restrictive shareholder pact between Vodafone and Telkom, plus the financial muscle the British group could offer, will help it capitalise on depressed asset prices to quickly push into new markets on the continent.

“Acquisitions will be a lot easier now, on the continent and also at home, where overlap with Telkom stopped them aggressively getting into the business data space,” said Rajay Ambekar, a telecoms analyst at Cape Town’s Cadiz African Harvest.

Uys stressed Vodacom “won’t rush” into acquisitions and said prices would drop further for African telecom assets that have shot up in recent years as European, Asian and Middle Eastern operators scrambled for a foothold in some of the world’s least-tapped markets.

Vodacom will make data a priority in a continent where internet penetration is still negligible but where investor interest has been on the rise and businesses are expanding, perhaps by buying Wimax licences through its Gateway business.

Vodacom has appointed a new board, with Peter Moyo, a former head of financial services firm Alexander Forbes, as chairperson.

The company said it expected to report slightly lower full-year revenue growth than that reported for the nine months to end December. Its full-year EBITDA (earnings before interest, tax, depreciation and amortisation) margin would be slightly lower than previous year.

The company said it may need to make writedowns on its investment in the Democratic Republic of Congo after a sharp commodity downturn and continued violence hit its mining-dependent economy, but said it would not leave.

“We are not running away, we are putting things in place to contain costs,” Uys told a conference call.

Headline earnings is the main profit gauge in South Africa and strips out certain one-off, financial and non-trading items.—Reuters


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