No black CEO for Vodacom

Government will hold a seat on Vodacom's board once the handover to Vodafone has been completed. However, its plan to put a black CEO into management will not be realised.

Vodacom, Vodafone and Telkom put pen to paper yesterday in a landmark deal to hand over SA's cellular love child to the foreign telecommunications giant.

During a media briefing with Vodacom and Vodafone yesterday, at Vodaworld, in Midrand, Vodafone CEO of Central Europe and Africa Morten Lundal said Vodafone was happy with the current management structure and there are no plans to change it.

Government reportedly wanted seven conditions to be met before it gave the deal its blessing, one of which was to have a black CEO for the Vodacom group. However, current group CEO Pieter Uys will maintain his position as the company's head.

Government also stipulated that Vodafone sign a deal with organised labour to ensure no retrenchments occur after the deal goes through. Vodacom is also expected to have exclusivity over Vodafone's sub-Saharan markets.

Lundal and Uys said yesterday that the company has committed to these stipulations. “Vodacom is more prepared to manage African countries. Even if we were not asked to do that, we would have anyway,” said Lundal.

Essentially, in any acquisition outside of the North African countries Vodafone already plays in, Vodacom will take the lead in any expansion or acquisition plan for Vodafone.

According to Lundal, the other aspect to this agreement is the brand. He says the company now needs to find a workable solution to promote both brands on the continent, since Vodafone will want its own visibility. “We are not exactly sure how we will do this yet, but it is a very workable compromise.”

The structure following the deal will give Vodafone 65% of the local telecoms company, Public Investment Corporation will have 4.6%, government will have 13.8% and Telkom Group shareholders will own 16.6%.

The government's shareholding as it stands will give it a seat on Vodacom's board and, after listing, government must hold at least 10% for up to 12 months. Under its new ownership, Vodacom has committed to listing by June next year.

Government has been a shareholder in the company for 15 years, and Uys says it has always been a good shareholder.

Lundal said that while it may not be the best time to list, the markets change quickly and next year may prove to be a better time for the company to go public on the JSE. He added that the value of shares when the company lists need not reflect the amount it paid for the additional 15% in Vodacom.

In a statement this morning, communications minister Ivy Matsepe-Casaburri said this transaction has a "direct positive impact on SA as it results in substantial foreign direct investment flowing into SA, and signals Vodafone's confidence in and continued commitment to the future of SA and the African continent”.

The ministry said the deal will free both Telkom and Vodacom from the current restrictive shareholder agreement and allow them to pursue their independent growth strategies. Matsepe-Casaburri expects Vodacom to be among the top 20 companies in terms of market capitalisation.

Both Vodacom and Telkom are pleased that the exact value of each company will become evident once the transaction has been completed. “The true value of Telkom will emerge,” said Telkom CEO Reuben September, at a briefing held by Telkom in Illovo yesterday.

Telkom's next venture is to become a converged competitor in the local market, adding both mobile voice and data to its arsenal of products. This was something it could never do under the old shareholder agreement it had with Vodafone.

Indeed, in Sub-Saharan Africa, Telkom was never allowed to provide mobile options; while Vodafone was never allowed to play fixed-line below the equator. “We will now be free to explore mobile opportunities and maybe partnerships with other mobile players,” said September.

The deal allows Telkom to retain 50% of the proceeds of the sale, which September says will be invested with care in several areas across the company, the first being infrastructure, which includes the company's much anticipated next-generation network.

It will also use the finances to fund possible strategic acquisitions to help the company meet growth targets. September says the company will also begin focusing on the under-serviced areas using fixed-mobile infrastructure, which will be a cheaper option for the company to reach the rural areas.

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