Vodafone aims to unify Africa divisions


The group is likely to collapse its operations into Vodacom, which is far more advanced and bigger than its sister companies…

Vodafone will likely consolidate some of its operations in sub-Saharan Africa into a single entity as part of its “single, coordinated Africa strategy”.

In pursuit of this strategy, the group is likely to collapse its operations into Vodacom, which is far more advanced and bigger that its sister companies.

Vodafone CEO Vittorio Colao said on Wednesday that the group was looking at “improving the cohesion of different operations”.

Vodafone’s Pan-African strategy, which also includes expansion opportunities, was likely to be driven by Vodacom, given the mobile network operator’s “scale, advancement and competence in technology”, Colao said.

If the consolidation happens, it will also allow the companies to share skills across the group’s operations.

Vodafone owns 65% of Vodacom, which has operations in Lesotho, Mozambique, Tanzania and the Democratic Republic of Congo. Vodafone’s other African assets are in Ghana, Ethiopia and Kenya, last-mentioned through a 40% stake in Safaricom.

Vodafone also has operations in other countries such as Nigeria where it provides technology services to companies.

Mergence Investment Managers portfolio manager Peter Takaendesa said a number of international companies had been considering exiting or reducing their exposure to Africa due to tough current economic conditions.

“I don’t think there is anything wrong if Vodafone consolidates [its other assets in Africa] into Vodacom as long as the pricing of the transaction is fair and Vodafone keeps its 65% stake in Vodacom. It is the transaction details that will determine whether it is a good deal or not,” Takaendesa said. Colao said that Vodafone aimed to maintain control of Vodacom. Farai Mapfinya, chief investment officer at Falcon Crest Asset Managers, said the move would make “great sense … as there is scale and integration, which will benefit both Vodafone and Vodacom”.

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If the consolidation goes through, it is likely that some assets, such as Vodafone Egypt, would be excluded.

If that happened, said Mapfinya, Vodafone would want to keep the high-quality assets “ring-fenced to ensure it maintains the sector-relative high rating they have enjoyed in recent times”.

Colao said that together with Vodacom, Vodafone had been looking at expansion opportunities in the continent over the past seven to eight years, but it had not succeeded. The quality of the businesses was inadequate or potential vendors would withdraw at the last minute, he said.

“It is not the lack of intention or opportunities that have prevented us from expanding. It [finding quality assets] has been hard so far,” said Colao.

Commenting on the recent downgrading of SA’s sovereign debt by S&P Global Ratings, Colao said that Vodafone had a long-term strategy in SA.

“We have taken a long-term view on the country, on the people and systems rather than on short-term events.

“If anything, the spirit of our discussion [with Vodacom’s executive committee] was not to cut investments,” said Colao.

Vodacom has been spending more than R10bn a year in expanding and improving its network quality in SA.