Vodacom is looking for expansion opportunities in Algeria, Nigeria, Ghana and Angola, based on opportunity and current market share.
COO Pieter Uys named the four African expansion targets, following an agreement between 50% shareholders Vodafone and Telkom that the cellular company could explore expansion opportunities in other regions, including the rest of Africa.
Irnest Kaplan, MD of Kaplan Equity Analysts, says Vodacom's chosen targets are lucrative markets and the company should do well.
He says Vodacom's selection seems to be based on opportunities within various countries, and may also have been informed by the countries in which it already has a presence.
Four key aspects that cellular companies consider when deciding to venture into new waters include the size of a country's population. Operators would also consider the spending power of the population, based on a per capita gross domestic product figure, he says.
In addition, operators would look at the relative strength of the competition. Vodacom, says Kaplan, has always been adamant it will be number one in any country it enters.
Probably the most important factor, although one that is generally considered at a later stage, is to identify the opportunity within the country in terms of licences or other operators that could be bought, Kaplan adds.
Country analysis
Vodacom, which is already in the Democratic Republic of the Congo (DRC), should do well in Angola, as the market is under-penetrated, he says. Angola also shares much of its border with the DRC.
BMI-TechKnowledge analyst Richard Hurst notes that Angola has a population of 14.5 million people, an extremely low fixed-line teledensity of 240 000 and mobile teledensity of 1.3 million.
Vodacom should also be able to use the lessons learnt from Mozambique, which has a similar language to Angola, he says.
Algeria, which Kaplan says is interesting as it is a different culture altogether, has a booming telecoms market.
Hurst notes that the country has a population of 32 million, fixed-line teledensity of 3.9 million and mobile teledensity of 19.6 million.
As a result, Hurst does not expect growth to be rapid for the operators. "Maybe there is opportunity to acquire stakes in existing operators, which would be better for Vodacom," he says.
Kaplan and Hurst agree Vodacom should do better in Nigeria than most people would expect. Nigeria, which has a population that is predicted to grow to 160 million by 2010, has a "horrendous" fixed-line teledensity of 770 000 and a mobile teledensity of 24.4 million.
Mobile teledensity is expected to grow to 52.5 million by 2010, providing plenty of opportunities for Vodacom, Hurst says.
It would, however, be interesting to note how Vodacom plans to enter the Nigerian market, both analysts say. Vodacom has previously attempted to enter this market through its bids for shareholdings in Nitel and V-Mobile.
Kaplan notes that Ghana, which is two countries removed from Nigeria, could also positively receive Vodacom. However, Hurst notes that the four operators in the country, which has a population of 21.8 million, fixed-line teledensity of 331 000 and 3.5 million mobile subscribers, have not done well.
"Performance has been spotty," he says.
Kaplan notes that Vodacom knows Africa as it already has operations on the continent and - as 90% of its business is head-to-head with MTN - it knows what it is up against.
He points out that Vodacom is prevented from entering Egypt and Kenya. UK-based Vodafone, Vodacom's 50% owner, has stakes in both countries.
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