Vodacom heads into Africa

By Candice Jones, ITWeb online telecoms editor

SA, 05 Mar 2009

Vodacom has expansion plans for sub-Saharan Africa, which will start as soon as it has been set loose from Telkom's grip.

The company recently completed the acquisition of African telecommunications wholesale firm, Gateway, which it hopes to use as a vehicle to the southern end of the continent.

Telkom's partial parental control has kept the company from competing in the broader African market.

While MTN has built operations in 21 countries across Africa and the Middle East, reaping the rewards of lower broadband and mobile penetration, Vodacom has had to sit on its hands. However, Vodacom's pre-listing statement, released this week, shows the company has big plans to revive its African expansion strategy.

Despite its hamstrung situation, Vodacom has grown a significant African customer base of 11.3 million people. However, the company still relies heavily on its South African operation for the bulk of its revenue.

However, analysts say the company's acquisition of Gateway may not be enough to complete a successful African strategy. According to Dobek Pater, managing member of the Africa Analysis team, Gateway's strength for Vodacom will lie in its vast list of corporate clients across Africa.

He says while Vodacom's investment in Gateway is incredibly sound, there are many aspects of Vodacom's Africa strategy where the company lacks competencies.

During a media conference call this week detailing Vodacom's future and Johannesburg Securities Exchange listing arrangements, CEO Pieter Uys said the company would leverage every opportunity that Gateway presented to it.

Pater notes that while Gateway has vast expertise in wholesale voice and the mobile voice market, the company lacks in the data space. “While it has been moving into the data market, there are still areas where it can be developed,” he explains.

Telecoms businesses are increasingly looking into hosted or managed data solutions, which Vodacom has competencies for in its Vodacom Business unit. For successful expansion, the company may need to grow those competencies, adds Pater.

Vodacom's pre-listing statement did not discount additional acquisitions or partnerships that will help it grow in Africa. With Vodafone using SA's mobile gem as an exclusive vehicle into sub-Saharan Africa, the company may have other valuable opportunities lined up.