Strategic lapses and a convoluted shareholder structure have meant Vodacom has failed to extend the leadership position it enjoys in its domestic market of South Africa to significant parts of Africa. In the company’s first change of leadership since it launched services in May 1993, incoming chief executive, Pieter Uys, describes how a converged strategy and the embrace of the economic, technological and regulatory transformation occurring across Africa and the world, is set to drive Vodacom’s long-awaited ascension to the top tier of pan-African communications providers

Pieter Uys, incoming CEO of Vodacom Group

Vodacom, South Africa’s 25 million-strong network operator, stands at the precipice of fundamental change that will either catapult it to the heights of Africa’s telecoms market, or perpetuate its inability to press its domestic advantage into other parts of the African continent.

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South Africa mobile telecoms company Vodacom has announced that UK operator Vodafone has agreed to acquire an additional 15 per cent stake in Vodacom Group from Telkom for a cash consideration of R22.5 billion (US$2.2 billion) less the pro rata consolidated attributable net debt of Vodacom Group of approximately R1.55 billion.

Vodacom CEO Uys believes following the completion of the transaction, Vodacom would look to utilise the Vodafone brand name more, an arrangement that may ultimately evolve to Vodacom adopting the Vodafone brand and name altogether

The transaction will increase Vodafone’s shareholding in Vodacom Group from 50 per cent to 65 per cent. Vodacom Group will be listed on the Johannesburg Stock Exchange (JSE) and the remaining 35 per cent of Vodacom Group will be demerged by Telkom to its shareholders.

The acquisition is subject to, among other conditions, approval by 75 per cent of Telkom’s shareholders and is interconditional upon Vodacom being listed on the JSE and Telkom demerging the remaining 35 per cent of Vodacom to Telkom’s shareholders.

Telkom’s two largest shareholders, the government of South Africa and the Public Investment Corporation Limited, owning a combined 58 per cent, have irrevocably committed to vote in favour of the transaction and will become significant shareholders in Vodacom following the completion of the transaction. The South African government has agreed that it will retain a minimum shareholding of 10 per cent in Vodacom for a period of 12 months after the listing on the JSE.

“We are hopeful that Vodafone will see Vodacom as its vehicle into Africa and involve us in everything that it does here on the continent,” said Vodacom Group CEO Pieter Uys, speaking exclusively to Comm. prior to confirmation of the deal. “To compete with the Zains and the MTNs you need that global presence because more services you will offer your customers going forward will have to be become global and accessible to customers across the continent.”

UAE operator Du this week announced that the company had made a net profit of AED 31 million (US$8.45 million) for the three months to end-September, its first net profit since the company started trading in February 2007 and a year ahead of the financial plan announced during the IPO.

Total revenues exceeded AED 1 billion during the quarter for the first time, an increase of 157 per cent year-on-year to AED 1.06 billion. Revenue growth was attributed primarily to continued strong expansion in mobile revenues from new subscribers and increased international inbound roaming. In Q3 2008 Du recorded revenues from mobile subscribers amounting to AED 819 million, an increase of 233 per cent year-on-year and 22 per cent quarter-on-quarter.

Gross margin amounted to 63 per cent, up from 53 per cent in Q3 2007. EBITDA stood at AED 101 million, for the quarter, up from a loss of AED 186 million in Q3 2007

Du reported that it added 453,000 subscribers during the quarter to total 2.671 million at the end of September, with the number of active users reaching 2.07 million, up impressively from 659,000 in the same period last year.
Fixed-line subscribers reached 248,000, an increase of 30,000 in the quarter.

“Achieving net profit in just 19 months of operation is a very significant milestone in Du’s history,” said Osman Sultan, Du CEO. “This is all the more significant considering we entered a market with such a high level of penetration.”   

Fixed line revenue accounted for AED 212 million in the quarter, a 54 per cent year-on-year increase and two per cent growth quarter-on-quarter, reflecting seasonality while broadcasting revenues remained stable in the period in line with forecasts.

Capital expenditure continued in the period, with a total of AED 347 million being invested into the development of Du’s fixed and mobile networks in the UAE.

MTN Group announced that its subscriber base increased to 80.73 million as at September 30, 2008 across the group’s 21 operations in Africa and the Middle East. This represented a 9 per cent increase from 74 million subscribers recorded at the end of June 2008.

MTN closes in on 100 million mobile subscribers, the first African operator to reach that milestone

MTN’s South and East Africa (SEA) region contributed 28 per cent of the group’s total subscribers while West and Central Africa (WECA) and the Middle East and North Africa (MENA) regions contributed 44 per cent and 28 per cent respectively.

The South African operation contributes 72 per cent to the SEA region’s subscribers, with its subscribers increasing 4 per cent to 16.17 million for the quarter to end-September. Prepaid growth was underpinned by the value proposition, MTN Zone, which was enhanced to include off net calls and which continues to be a success.

Meanwhile Uganda increased its subscriber base by 16 per cent following the introduction of MTN Zone in late July, with approximately two million subscribers on this price plan at the end of September.

MTN Nigeria, which contributes 56 per cent to the WECA region’s subscriber base, recorded a 9 per cent increase in subscriber base to 20.17 million. Aggressive network rollout in Nigeria continued in Q3 with 524 base stations rolled out during the quarter. Quality of service improved significantly resulting in the advertising ban being lifted by the Regulator.

In the WECA region, MTN Zone was introduced in Ghana, Cameroon and Benin during the period under review. Ghana rolled out 377 base stations and increased its subscriber base by 14 per cent to 5.7 million.

The MENA region recorded a 10 per cent increase in subscribers for the quarter. This was mainly due to continued growth from the Iran operation, which increased its subscribers by 13 per cent to 13.14 million. Following the substantial disconnections in Q2, subscriber growth in Sudan started to show an improvement with a 7 per cent increase in its subscribers to 2.26 million.

“We are satisfied with the subscriber growth across our operations. As competition increases, MTN continues to explore growth opportunities," commented Phuthuma Nhleko, MTN Group president and chief executive officer.

Zain Group has increased its stake in Zain Iraq from 30 per cent to 62 per cent through exercising a pre-agreed call option between Zain and the owners of Athir National (Bahrain), which is one of the three founders of Atheer Telecom Iraq (Zain Iraq) for a total consideration of US$34.5 million.

Zain Iraq CEO Ali Al-Dahwi has been hard at work integrating the former MTC-Atheer and Iraqna into a single operation

Zain Iraq is the leading mobile provider in the country with over 8.5 million active customers.

“We have taken this step due to our enduring faith and trust in the future of Iraq and the enormous potential of its telecommunications industry, commented Saad Al-Barrak, CEO of Zain. “We are confident this increased shareholding will positively impact Zain Group’s future financial results in many facets, to the delight of our many stakeholders.”

Zain has been providing mobile telephony in Iraq since December 2003 (previously under the name of MTC-Atheer). In August 2007, the company acquired a 15-year nationwide licence for US$1.25 billion, shortly thereafter followed by the acquisition of Iraqna for US$1.2 billion on December 31, 2007. On January 5, 2008 Zain Group merged Atheer with Iraqna under the new brand name Zain.

Iraq has been witnessing significant growth rates in mobile users over the last few years with penetration rates now reaching 50 per cent.