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to main page Vodafone/Vodacom - the
Regional Giant Renewed
by Richard Hurst, Program Manager, Communications, IDC South Africa The recent announcement by Vodafone that it would seek to gain a controlling stake in the successful South African based mobile network operator, Vodacom was not received with too much surprise from businesses and industry observers as Vodafone had long held that it would like to increase its stake in the operator. Currently Vodafone still owns only 50% of Vodacom but will be increasing its stake to 65% at a cost of £1.2 bn, the remaining 35% will go to current shareholder Telkom SA with a significant portion of this expected to be unbundled via a listing on the Johannesburg Securities Exchange (JSE). As an aside, Telkom SA shareholders are bracing themselves for an expected handsome dividend once the transaction is finalised. The intended listing of Vodacom on the JSE is expected to go ahead around the second or third quarter of 2009 and will not be delayed despite the current global economic slow down. The rationale behind this is that the purpose of the listing is to allow the general public to gain a wider participation in the operators as opposed to the need to generate capital. In a quarterly trade update for the end of 2008 Vodacom announced that it had managed to grow it total subscriber base to over 37.8 million across its various African operations. South AfricaIn the context of the South African market Vodafone is acquiring an operator that has developed a leading position in the mobile market with 26.5 million subscribers out of a total of 49 million, giving the operator a market share of roughly 54%. However the South African mobile market is fast nearing a saturation level, with penetration at around 98%, prompting the operator to seek opportunities elsewhere in the South African telecommunications market.Vodacom is currently rolling out its own fibre optic network to begin offering high speed high capacity services to businesses which will see competing with its current parent Telkom SA. Vodacom has indicated that it will invest roughly ZAR800 million, roughly US$80 million based on current exchange rates, into its fixed network infrastructure. While this expenditure will pale against Telkom SA's expected ZAR5 billion capex over the next five years, Vodacom can be expected to leverage its existing corporate client base to begin moving up the value chain. Indeed Vodacom may prove to be more adept at this and with the assistance of an international player such as Vodafone, leveraging their expertise and knowledge base. On the home front the operator faces more challenges as the recent converged licensing dubbed the Electronic Communications Network Services (ECNS) emerging in the wake of the Electronic Communications Act (ECA) is expected to see competition emerge from a number of smaller networks and service providers. While these new networks will not have the same scale as the larger networks they could prove to be the thin edge of the wedge into the lucrative mobile services market. New African OpportunitiesIn respect of the emerging African opportunities Vodafone and Vodacom have been involved in something of a two pronged approach with Vodafone exploring opportunities in Kenya, via a shareholding in Safaricom a recent acquisition in Ghana and its long standing Egyptian operation. Vodacom has developed a presence in Mozambique, Lesotho, the DRC and Tanzania. In certain instances the operator has experienced mixed results with success in Tanzania, with 5.3 million customers and rolling out 3G services in the metro areas of the country, as well as the DRC which has managed to gain just over 4 million subscribers.As the Vodafone acquisition is completed it is expected that South Africa will become the operational and support hub for the operator's existing African networks and any expansion activities. The new centralised approach to the African telecoms opportunities will streamline operational efficiencies and allow the operator to maximise synergies and expertise across the region. Vodacom has also started to firm up its position in the African market via the recent acquisition of Gateway Telecoms for roughly US$675 million with an additional payment of US$25 million into the company's high yield bonds. Gateway is reported to be one of the largest carriers of international voice into and out of Africa. African challengesThere are several challenges facing not only Vodacom or Vodafone but most mobile network operators seeking to enter the African mobile wireless market. An important facet of these challenges will be the regulatory environment the African markets are currently at various stages of development in terms of their respective telecommunications regulators. In addition these regulators are grappling with the issues of injecting more competition into their markets with the expectant knock-on effect of an increased penetration of services while creating a transparent environment and embracing new technologies and services such as wireless broadband and VoIP.Another challenge for most operators is the limited supporting infrastructure for their respective network roll outs implying that in most instances operators have to provide their own backhaul and power facilities. This places an extra burden on capex and opex. As the subscriber base of the African operators begins to increase at a rapid rate so too do these operators have to deal with a decline in ARPUs. While revenues are expected to continue to grow, keeping pace with the subscriber additions, the decline in ARPUs presents an interesting challenge to mobile network operators. However, the arrival of 3G and data services could present the operators with a fresh revenue stream in the African market. Future outlookThe African component of the Vodafone/Vodacom entity is expected to present the operator with an exciting opportunity to grow its subscriber base and presence in emerging markets.-- -- -- -- -- -- -- -- -- -- -- -- IDC offers data-backed strategic advice for service providers operating in CEE and MEA through its Central and Eastern European and Middle East and African Carrier Transformation Strategies series and through customized research and consulting engagements. For more information, please contact Tatiana Hinova (thinova@idc.com; +420 221 423 140) or John Gole (jgole@idc.com; +420 221 423 140.) << Back to main page Recommend This Newsletter to a Friend or Colleague Please unsubscribe me If you haven't already, register at our Web site to know what's happening and to help us improve our products and services. You can register at http://www.idc-cema.com/index.php?wsp=36 IDC CEMA Malé náměstí 13 110 00 Praha 1 Czech Republic Tel. +420 2 2142 3140 Fax. +420 2 2142 3150 www.idc-cema.com www.idc.com |
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