Vodacom’s new tack in Africa

2010-06-19 14:34

Vodacom is focusing on generating as much return as possible on its

current operations as expansion opportunities across Africa become more


Vodacom is the largest mobile telecommunications company on the


Vodacom spokesperson Richard Boorman says: “Our focus is not on

absolute size but rather on improving the returns on our current operations in

five ­countries. These ­operations ­cover a population of 180?million people.”

Boorman’s comments come as top executives of Indian mobile

telecommunication company Bharti Airtel meet in Kampala, Uganda, for a five-day

session to sketch out directions for the company in Africa.

Bharti is the latest

big mobile telecommunication ­player in Africa after acquiring Zain Africa for

$10.7?billion (about R81?billion).

The ­other significant player is MTN, which

unsuccessfully tried to merge with Bharti last year.

Boorman says Vodacom will look for good expansion deals.

“The current expansion deals and partnerships are priced too high

to make a reasonable return but we are keeping our eyes open.

“Right now we are focusing on our pillar strategies, which include

focusing on maintaining leadership in broadband solutions and that is doing very

well in South Africa,” he says.

In recent years MTN has found it difficult to procure acquisitions

on the continent.

This month its talks with Egypt’s Orascom Telecom about a

­potential acquisition collapsed.

It was the fourth time in three years that MTN failed to make an

acquisition or form a partnership that would allow it to expand ­beyond its key

markets of South Africa, Nigeria and Iran.

It also failed to link up with ­Reliance Communications and later,

twice, with Bharti. Both firms are Indian.

Vodacom has its own expansion difficulties in Africa. It is

currently in arbitration in Brussels with its minority shareholders, Congolese

Wireless Network (CWN) of the DRC. CWN has accused Vodacom of owing it $180


An element that does not unduly concern Vodacom about expanding on

the continent is its association with the UK’s Vodafone, which became its main

shareholder last year.

“Vodafone has made it possible for us to bring the latest ­products

into South Africa. We also now have leverage on research and mobile

development.’’ says Boorman.

Dobek Pate, telecoms analyst at Africa Analysis, says Vodacom’s

dispute with CWN could represent a significant setback for the cellular group

because all the large new operating licences have already been snapped up.

Pate adds that Vodacom’s ­revenue from the DRC has ­decreased

despite investing more than R5?billion in network infrastructure.

Steven Ambrose, managing ­director of consulting firm World Wide

Worx Strategy, says Vodacom would be better off focusing on markets that offer a

more ­stable growth potential.

“The growth in broadband and related services will in all

probability be the next area of focus for both Vodacom and their parent

Vodafone,” says Ambrose.

BMI-Techknowledge telecoms analyst Mandla Kuzwayo says Vodacom may

not be able to catch up with MTN on the continent but can bank on its

relationship with Vodafone, which has a huge African footprint.

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