South African government sells out of Vodacom

The government of South Africa confirmed the sale of its 14 per cent stake in Vodacom, which is worth more than US$2 billion, to the Public Investment Corporation (PIC).

The government has been considering selling the stake since at least last year, as part of its plans to raise funding for struggling state power utility Eskom Holdings.

The proceeds from the sale will be used to finance a ZAR23 billion (US$1.9 billion) allocation to Eskom, although the country’s treasury did not confirm how much the Vodacom stake was worth.

Bloomberg has previously speculated that the government’s Vodacom stake is worth approximately US$2.3 billion.

The government also committed to converting a ZAR60 billion subordinated loan granted to Eskom into equity. Eskom is struggling to maintain energy in some of South Africa, and regulators reportedly rejected the company’s request to hike up prices last week.

In a separate development, Vodacom secured approval from South Africa’s antitrust regulator to acquire Tata-owned ISP Neotel for ZAR7 billion.

South Africa’s competition commission approved the deal, which was first announced last May, under the condition that Vodacom does not cut any jobs and commits to a ZAR10 billion investment in the company within five years. Under the terms, Vodacom will also not have access to Neotel spectrum for at least two years.

The acquisition has already been approved by South Africa’s communications regulator ICASA, and will now face a competition tribunal. Rivals, including MTN and Cell C, have expressed reservations over the deal in the past over fears that Vodacom will become too dominant in the market.