Vodacom makes its investment mark

By Candice Jones, ITWeb online telecoms editor

SA, 04 Mar 2009

Vodacom's listing during the current financial crisis may not be ideal; however, analysts say it will not prove problematic for the company.

Vodacom announced last night that it would list on the Johannesburg Securities Exchange (JSE) on 5 May, which is a precondition to a deal that will see Vodafone become the company's majority owner.

The mobile operator's listing day follows a global economic meltdown that many financial analysts are calling the worst in history. Local businesses are steering away from listing because of the costs involved, as well as the extreme volatility of the markets.

However, as part of a deal that will see UK-based mobile giant Vodafone take majority ownership of SA's telecoms darling, Vodacom agreed to become a public company.

Vodacom is bound by the agreement and CEO Pieter Uys admits that, while it is not the ideal time, listing will have no dire consequences for the business. “We are not listing to raise capital; if we were, it would be far more difficult,” he explained during a media conference last night.

Xhaed = The good and bad

Denis Smit, MD of research firm BMI-TechKnowledge, says people will be lining up in droves to take a part of Vodacom. “Even though it may not be the best time, people know that Vodacom is a solid business. I believe it will do exceptionally well.”

Vodacom may not raise the numbers it is hoping for, but it will definitely be a successful listing of an exceptional company, adds Smit.

Vodacom going public is being called the largest listing the JSE will see this year. Many analysts are waiting to see whether Vodacom's implied value will be reached as its market capitalisation.

Even though it may not be the best time, people know that Vodacom is a solid business. I believe it will do exceptionally well.
Denis Smit, MD, BMI-TechKnowledge

The value is drawn from Vodafone's offer of R22.5 billion for 15% of the company. “This places the estimated value of Vodacom in the region of R110 billion to R120 billion after debt deductions,” explains Irnest Kaplan, head of Kaplan Equity Analysts.

While Vodacom is definitely the company to watch, Kaplan doubts the company's market cap will reach the R120 billion-mark as a listed business. He says the market has changed significantly from the time the first offer from Vodafone was made and this will have an impact on the actual value ascribed to Vodacom by the market.

Kaplan explains that Vodacom could easily be ranked in the top 40 companies on the JSE and, while time will tell, it could even be ascribed a place in the top 20. “It is good all round that Vodacom is listing; it will provide investors with another gorilla in the industry.”

Other investment

Vodacom's actual value may become clearer over the next few weeks, and investors may not need to wait until the listing day to find out what it is.

Kaplan says if investors monitor what Telkom's share price does over the next few weeks, an idea of the interest in Vodacom will be seen. “If Telkom's share price jumps, then you will see that people may well be interested in Vodacom, since after the unbundling, they will have an effective stake in the company.”

While Kaplan says the company will make a mark on the investment space, Kaplan believes that if investors want to buy in, now is the time. “I would buy into Telkom and after the listing sell my shares in Telkom and Vodacom, and buy into MTN.”