Current prices being paid for acquisitions of cellular operators in Africa are too high, says Vodacom CEO Alan Knott-Craig.
Speaking at the presentation of the cellular network operator`s latest financial results in Midrand yesterday, Knott-Craig said the industry was seeing in Africa what happened in Europe in the 1990s, with companies paying inflated prices to gain territory.
"That`s now coming back to them in the form of write-offs," he commented.
Knott-Craig was replying to a question on the company`s expansion strategy. Vodacom, which dominates the South African market, lags rival MTN outside the country.
Earlier this year Vodacom withdrew from talks to buy a controlling interest in Nigerian operator V-Mobile, as the price was deemed to high.
"When you go into these countries now, they are no longer new markets," Knott-Craig said. "They are well established, and it`s expensive to go into established markets at these prices."
He told analysts that the group was also bound by a shareholder`s agreement with 50% shareholder Vodafone, which stipulated that Vodacom could not enter African markets north of the equator.
Wider screen
"Either our shareholders will have to get a new radar or get a wider screen," he said.
Papi Molotsane, CEO of Vodacom`s other 50% shareholder, Telkom, said at Telkom`s results presentation that it was important that Vodacom be free to explore other markets.
"We are putting pressure on Vodafone to remove this restrictive gloss," he said.
Vodacom is looking to other sources of revenue, including additional services and products such as mobile television.
"It`s going to be a really big technology in this country," Knott-Craig said. "I don`t see why we won`t have the same penetration with low-cost mobile TV as we have with cellphones."
He pointed out that about 13 000 customers watched the delivery of the verdict in the recent trial of former deputy president Jacob Zuma. The group is now testing Digital Video Broadcasting - Handheld technology together with broadcaster MultiChoice.
"We also have to invest a lot in customer care. We will spend the next few months building what is probably the biggest customer care centre in the country in the Johannesburg CBD," he added.
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