Vodacom carries on regardless

Johannesburg, 19 Nov 2007

SA-based cellular operator Vodacom is continuing with its own agenda, despite talks between its shareholders, Telkom and Vodafone.

Speaking this morning, at the release of the company`s interim results, group CEO Alan Knott-Craig said he knew no more than the market.

"Not much has changed; we`re about as confused as we were six months ago. I don`t know any more than that, although I must say we are friendly with Telkom," he joked.

Vodacom, MTN and Telkom are in discussions, and speculation is that these may result in Telkom selling its 50% stake in Vodacom to Vodafone, while selling its fixed-line business to MTN. Last week, Vodafone CEO Arun Sarin said he expected a strategic review by partner Telkom to last another two months.

"We would be interested in taking up our interest (raising our stake), whether that is 10% or 20%, or whatever that number is. The game-plan would be that the remainder of the shares would be listed... which I think would be a good thing," he added.

In the meantime, Vodacom has been building, what Knott-Craig calls, an "excellent period".

For the six months ended 30 September, the company`s subscriber base increased 22.6%, to 31.6 million; revenue increased 17.2%, to R22.8 billion; and net profit increased 17.5%, to R3.7 billion.

"Our shareholders wanted dividends, so we`re giving them R2.75 billion," said Knott-Craig.

BEE moves forward

Despite ongoing discussions between its shareholders, Vodacom has approved its long-discussed black empowerment transaction.

"Shareholder activity has delayed this by four months, but I am pleased to announce that our board gave us the go-ahead last week," said Knott-Craig.

This equity transaction - which it values at R7.5 billion - is hoped to be concluded by the first or second quarter of next year. It will be targeted at SA-level and will not impact the group`s shareholding.

"I must admit I was surprised that our shareholders agreed to finally give the go-ahead. I guess, at the end of the day, this deal is a commercial imperative and this outweighed other imperatives," noted Knott-Craig.

The company declined to reveal what portion of the South African holdings the R7.5 billion deal would encompass.

Buying continues

Vodacom also noted the acquisitive actions it had taken during the period.

Its investment arm, Vodacom Ventures, acquired a 35% stake in XLink for R12.3 million. It also increased its interests in Smartphone SP and Smartcom to 100%, for R935 million and R18 million, respectively.

Knott-Craig revealed the company would exercise its option to increase its stake in iBurst parent, WBS, by a further 15.5%.

On the Internet service provider (ISP) side of the business, Vodacom has been less successful in identifying and finalising a suitable acquisition target.

"We said we want to identify a tier one ISP to kick-start our entry into the market, but it`s been difficult at times. Our size in the market, together with Telkom`s shareholding in our business, could see a deal held up by the Competition Commission. We`re still looking but we are ramping up our own organic growth initiatives while that process is going on."