SA's top mobile operator, Vodacom, has been applauded for its exhaustive attempts to rescue its ailing Congolese operation, as analysts argue that the business potential in the Democratic Republic of Congo (DRC) is worth the fight.
This comes after Vodacom and fellow shareholder Congolese Wireless Network (CWN) agreed, late last year, to appoint NM Rothschild & Sons to explore options for the Vodacom Congo operation.
Vodacom, which owns 51% of the operation, has been locked in a dispute with CWN, which owns a 49% stake in the operation, for several months over a funding agreement between the shareholders.
CWN says Vodacom International has plundered Vodacom Congo of capital and accused the company of fraud.
The Congolese company has also accused Vodacom of forcing its DRC operation to pay up to $180 million to satisfy loan agreements with “uncommercial terms and conditions”. In January, CWN threatened to take the matter to the courts in Kinshasa.
Vodacom has lashed out at the accusations, saying CWN has made it impossible to find an amicable arrangement. The matter is in an ongoing arbitration process.
In addition, business in the region has been challenging at best. Vodacom reported a 28.3% revenue decline for Vodacom Congo during its last financial year-end presentation.
Meanwhile, Vodacom's recent half-year financial results highlighted a 17.4% subscriber decline year-on-year for the Congolese operation. Add to that, a recent policy change in the country saw the company lose around a million connections on inactive SIM cards.
Rescue attempt
Despite the poor business situation and the ongoing feud, during which Vodacom had considered pulling out of the region, the operator seems to be in a last ditch attempt to save the operation.
Analysts have encouraged Vodacom to hold onto the operation, arguing that, despite the challenges, the country has positive long-term potential.
Absa investment analyst Chris Gilmour points out that the DRC has a high populace that bodes well for high subscriber volumes. The company has about 40% of the market in the DRC, which has a low penetration rate at 14%.
Frost & Sullivan industry analyst Spiwe Chireka maintains the DRC is one of the few remaining markets in Africa that still has room for tremendous growth.
“This may be a situation were resilience pays off,” Chireka points out.
Gilmour adds that Vodacom must try every attempt to hold onto this investment as opportunities across the African region dwindle. He points out that Vodacom has a presence in very few African countries, compared to its competitors MTN and Zain.
“The big danger if Vodacom pulls out of the Congo is that opportunities in other regions are few and far between,” maintains Gilmour.
Chireka concurs and argues that Vodacom has realised the potential of the region. “It's no surprise that Vodacom is still fighting the fight,” she concludes.
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