European Internet communications company Tiscali has bought Vodacom`s 40% stake in Vodacom World Online, making it a wholly owned Tiscali subsidiary.
The deal was based on an undisclosed cash payment, reportedly in the region of R30 million, and is effective as of 1 January.
A condition of the deal is that Vodacom makes World Online one of its service providers, which gives it the right to sell Vodacom airtime and contracts.
According to World Online, the clause makes it a communications company able to offer both data and mobile voice services, differentiating it from traditional Internet service providers and its archrival M-Web, which describes itself as a media company.
Tiscali, which is listed on the Milan Stock Exchange, has operations in 15 European countries, ranging from operating a fibre optic network on that continent to aggregating media. It inherited a 60% stake in the local Vodacom World Online when it acquired the floundering European parent World Online in December 2000.
Rumour has long had it that the Vodacom stake was up for sale, but World Online says the deal was not a fire sale.
"There were other serious buyers on the table in the last three months, and the people looking at the SNO [second national operator] were snooping around quite heavily," says World Online MD Graeme Victor.
He says the primary reason Tiscali concluded the acquisition is because the South African operation is one of only two profitable ISP subsidiaries, the other being the home base in Italy. "Not EBITDA [earnings before interest, tax, depreciation and amortisation] profitable but bottom line profitable," he says. "They were very interested in that."
The company has been profitable since April last year. It currently boasts around 150 000 dial-up subscribers and around 100 large corporate clients using leased-lines, the latter having been built up in the last six to eight months.
Victor, formerly MD of Vodacom service provider Vodac, says the service provider part of the business will form a new division, and is likely to contribute a significant part of the company`s revenue in future, but that World Online will not become a cellular service provider.
"We will now become a communications company that can offer both data and mobile solutions. We will be going to corporate clients with both, something nobody else can do right now."
The eventual goal is to become a virtual operator on the Vodacom network, something for which current telecommunications regulation does not make allowances. Victor says the company may also become a Telkom service provider in due course, depending on the pace and nature of deregulation.
Tiscali abandoned the World Online name soon after its acquisition of that company, but Victor says the name is likely to remain in trading use locally, although the company is likely to be renamed Tiscali.
Vodacom says it turned a profit from the sale and Joan Joffe, the company`s group executive of corporate affairs, says the experience gained through a three-year association with the company is "insurmountable".
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