BEE scares off Vodafone

By Damaria Senne, ITWeb senior journalist

Johannesburg, 20 Sept 2007

UK-based mobile provider Vodafone has confirmed it is not interested in buying Telkom's entire 50% shareholding in SA's largest mobile operator Vodacom. However, it would like to acquire a majority share.

Reuters reports that Vodafone, which holds the other 50% equity shareholding in the company, has been put off by SA's black economic empowerment (BEE) policies.

The news service states that Vodafone CEO Arun Sarin explained to a Goldman Sachs investor conference in New York this week that if Vodafone bought the full 50% Vodacom shareholding, it risked securing the shares at retail price, only to sell part of the stake at a wholesale price in a BEE deal.

A Vodafone spokesman says the company is only interested in acquiring a smaller piece of the shareholding so it can gain control of Vodacom. He would not specify the size of the additional Vodacom stake Vodafone is seeking to acquire. Local analysts value Telkom's Vodacom stake at about R75 billion.

The Vodafone spokesman declines to clarify how the company will comply with government's BEE policy.

Telkom also refuses to clarify whether it will sell the rest of the Vodacom stake not acquired by Vodafone, or whether it would remain a minority shareholder in the mobile company.

A Telkom spokesman says the fixed-line operator has communicated its intentions via cautionary and has nothing else to add.

Talk that Vodafone would buy Vodacom's entire equity was sparked last month when Telkom issued a cautionary announcement, saying it had entered into discussions with Vodafone that could see the fixed-line utility sell its mobile assets.

BMI-TechKnowledge senior analyst Richard Hurst says the fact Vodafone would not buy the entire 50% shareholding is not a bad thing. Telkom could still find other buyers, he says. "This is good news for Telkom, despite the fact that its share price dipped at the news. Telkom will still have a cash cow."

BEE obligations

Vodacom previously stated it was in talks that would see 7.5% to 10% of the company sold to empowerment partners. Vodacom employees are to gain a quarter of that deal, the company said at the time.

Communication Workers Union spokesman Mfanafuthi Sithebe says the union is opposed to Vodafone's plan to buy more of Vodacom.

"Foreign ownership of local companies should be limited, as a majority shareholding by an international company means that dividends will leave the country," he says. "SA has a social development agenda and it cannot afford to have resources leave the country."