Hitches trail Vodacom bid to expand operations in Africa

Few years after it missed the opportunity to establish a strongold in Nigeria, Africa’s biggest telecoms market, by shunning repeated investment prospects, Vodacom is now desperately seeking opportunities to expand its operations in Africa, as its revenue in South Africa, currently generating 80 percent of its revenue is fast dwindling due to fierce competition from rival brands.

Vodacom parent firm, UK-based Vodafone’s CEO, Vittorio Colao, said at a press briefing in Johannesburg Monday that the group – the world’s second largest network after China Mobile – was still seeking to expand its African operations, but “there have been fewer opportunities than we thought”.

Colao, who last year described Nigeria as an emerging telecoms market, added that the firm was still interested in investing in the country, further stressing, “despite the fact that Vodafone has expanded its operations tremendously across emerging markets in the past two years with acquisitions in Turkey, India, South Africa and Ghana to make up for slower growth in Europe, the Nigeria telecoms sector is a prized and valuable market that we will be glad to operate in.”

Vodafone owns 65 percent of Vodacom – a stake Colao says the group is happy with, but would be open to increasing, should the opportunity arise.
Vodacom SA used to be the biggest telecoms network in Africa until MTN launched into Nigeria in 2001, and apart from its operations in SA, the telecoms company also operates in Tanzania, the Democratic Republic of Congo, Lesotho and Mozambique.
Vodacom manages Vodafone operations in Egypt, Ghana and Kenya, and the global telco is also present in other markets, but only offering fixed-line services. But it is finding it increasingly difficult to expand beyond these markets.

The company has been on the hunt in Africa for years, without much success. As far back as 2006, Vodacom founding CEO Alan Knott-Craig said that the company had keen interest in expanding further into Africa and penetrating regions north of the equator.

In 2010, former Vodacom CEO Pieter Uys disclosed that the operator had struggled to find a suitable candidate for an acquisition or merger, while arch rival, MTN concluded further expansions plans with a deal with Orascom.

At the time, Uys said one of the company’s largest hurdles into Africa was the price of the larger assets. “The current price expectations on a possible M&A [merger and acquisition] in Africa are too high. We are still looking for big opportunities, but with a reasonable tag.”

Five years down the line, not much has changed. Colao says Vodacom’s hurdles in Africa are essentially price and the quality of the assets. “I have to say, the good assets in Africa, the owners often have a disproportionate idea of their value. But most of them are not good companies.”

Colao says Vodacom has looked at all its options, big and small, adding that if the right opportunity does not come at the right price, then it must be borne in mind that Vodacom is a listed company and cannot take the risk for its shareholders’ sake.