Vodacom has written down its Nigerian Gateway operation by a further R1.5 billion, after the unit underperformed, having already impaired it by R3.2 billion in the previous financial year.
Vodacom bought Gateway in 2008, for $700 million, or R7.4 billion, at an exchange rate of R10.48 to the US dollar, when the deal was finalised in December. The company is now worth $72 million, around R505 million.
Gateway has customers in 40 countries in Africa, providing communications services to multinational companies and telecommunications network operators.
CEO Pieter Uys says Gateway's carrier business performed well, but the higher margin Vodacom Business Africa did not meet expectations. He says the unit has been reorganised to make sure it delivers.
In the previous financial year, Vodacom wrote Gateway down by R3.2 billion. Uys says “there's not much left to impair”.
CFO Rob Shuter says the lower performance was not material in the rest of Vodacom's numbers. He wants Vodacom Business Africa to reach an EBITDA margin of about 15% within the next year or two. The carrier unit operates at margins of 2%, which is typical for the industry.
Shuter explains the company also took a long-term view on Gateway's carrier business due to the competitive nature of the industry.
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