Business

Vodacom to extend African footprint

2016-07-24 15:00

Vodacom is actively looking for acquisition targets in Africa, despite larger rival MTN’s record multibillion-rand fine in Nigeria for failing to disconnect dormant users.

Board chairperson Peter Moyo told City Press this week that the company, which controls half of South Africa’s cellphone market, was keen to add to the five African countries it operates in, but would be disciplined in its approach.

Moyo declined to be more specific about Vodacom’s African plans, including which countries the company was eyeing.

Vodacom has almost 61.8 million customers in five African countries – South Africa, Mozambique, Tanzania, the Democratic Republic of Congo and Lesotho – compared with MTN’s 232.5 million customers in 21 countries in Africa and the Middle East.

MTN was fined about $1.6 billion (R23 billion) by Nigeria’s regulator for failing to deregister 4.5 million inactive customers in the country, which authorities said compromised its fight against the Boko Haram fundamentalist group.

The fine had initially been set at $5.2 billion. MTN announced this week that it would report a loss for the first half of this year because of the Nigerian penalty.

“The issue really is that we have been struggling to get available opportunities,” Moyo said after the company’s 21st annual general meeting in Midrand, Johannesburg. “We have been looking and will not stop looking, but we are going to be very responsible.”

Also this week, Vodacom issued its second-quarter results, which showed a 3% drop in customers in the June quarter, which the company attributed to regulators in its markets in the rest of Africa changing their customer registration process.

South Africa’s mobile penetration rate of more than 150% is more than double that of the Democratic Republic of Congo and Mozambique at 59% and 62%, respectively, according to global telecommunications researchers BuddeComm.

Tanzania sits at 81%, while Lesotho is at 97.8%.

With four or more cellphone operators in many African countries, analysts see potential for further consolidation as penetration rates rise amid slowing economic growth due to a drop in commodity prices and declining global growth.

The Groupe Speciale Mobile Association, an association of mobile operators and related companies devoted to supporting the standardising, deployment and promotion of the GSM mobile telephone system, said research conducted by Frontier Economics found no evidence that unit prices in mobile markets with three players were systematically higher than those in four-player markets.

Apart from greater numbers, Moyo also sees data and other value added services as being part of the company’s growth drivers, especially outside South Africa and Lesotho. South Africa faces increasing competition from MTN, Cell C and Telkom, as well as new players in the new fibre market.

There were also opportunities to be had in the growing fibre market in both the home and business segments, Moyo said, disputing assertions from some analysts that the company had been slow to make its mark.

MTN recently cut fibre packages by half in a bid to gain a bigger share of a market with a growing number of players.

Nkateko Nyoka, the company’s chief legal officer, said Vodacom was also analysing the requirements for new spectrum released by the Independent Communications Authority of SA (Icasa) before deciding whether to apply. However, the company was largely satisfied with the process
so far.

Icasa surprised the market last week with the release of the invitations, but analysts say with reserve prices starting at R3 billion, the auction, which will be held in January, may turn out to be expensive.

Nyoka declined to comment on the pricing, saying the company needed to study the requirements first.

In April, the Constitutional Court ruled in the “please call me” case that Vodacom must pay former employee Kenneth Makate for inventing the service.

Moyo declined to provide an update on the negotiations related to the settlement of this matter.

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January 20 2019