Vodacom favours liberation

Johannesburg, 20 Nov 2007

If Telkom divests of its 50% shareholding in Vodacom, the cellular company will be able to pursue greater opportunities, such as local acquisitions and greater spread of services within the market.

So says Vodacom group CEO Alan Knott-Craig, adding that, despite this, the company is otherwise unlikely to change its profile and how it does business.

The comments follow months of speculation that Telkom`s mobile strategy review could see the fixed-line operator rid itself of its interest in Vodacom in favour of a closer mobile relationship.

In recent months, Telkom has confirmed it is in talks with Vodacom`s other shareholder, Vodafone. The company has also admitted it is in talks with JSE-listed cellular giant MTN. Any deal between MTN and Telkom is unlikely to be approved by the Competition Commission as long as Telkom retains its interest in Vodacom.

Open doors

Although Knott-Craig maintains he is in the dark as to the progress of these discussions, he admits the company`s co-parent sometimes gets in the way of it realising its strategy.

Six months ago, Vodacom said it wanted to purchase an Internet service provider "about the size of Dimension Data`s local operations". This acquisition would enable it to buy its way into the managed services sector.

However, Knott-Craig says this strategy has been hampered by concern over getting the deal through competition authorities.

"The market followed Telkom`s attempted purchase of Business Connexion (BCX) vigilantly. And I doubt that I am the only one who saw the negative impact that had on BCX. As a result, companies in this sector are jittery when it comes to entering negotiations with us," he explains.

However, if Telkom unbundles its stake in Vodacom, the resultant shareholding could be more conducive to making key acquisitions.

As this is unlikely to be concluded in the near-term, Knott-Craig says his team is focused on building its managed service capacity and customer base organically.

No change

As for the profile of the business post-unbundling, Knott-Craig says little is likely to change.

"Vodafone likes us, they like what we are doing and how we are doing it. The company`s chief executive Arun Sarin likes our people and the way they think," he says.

The one aspect that will change at the end of next year is Knott-Craig`s leadership of Vodacom.

"I`ve been clear that I want to leave at the end of this contract. Life isn`t infinite and there are things I still want to do. I want to work on my photography, write a book, teach a little and maybe get involved with fostering start-ups. But we have a strong management team that is more than able to provide following my exit."

Listing lust

Not even a possible listing would impact the company`s operations, says Knott-Craig.

"At the moment, we are operating as a listed company because of our parents. We actually conduct our business and provide our financial reports as if we were directly listed," he explains.

However, this does not mean a listing would be without benefits, notes Knott-Craig.

"Having Vodacom as a listed entity would give our BEE shareholders a lot of benefit by providing a fair financial valuation of the company`s worth. It`s the only way to do so, in my opinion."

Until such time that Telkom, Vodafone and MTN come to agreement on their discussions, Knott-Craig says he is focused on keeping the company "on top of the game".

"We can`t let these talks distract us. We`re being as open as we can with our workforce and trying to provide some shield from the rampant speculation. However, the business is moving on regardless of the discussions."