SA's biggest mobile operator, Vodacom, hopes to be in a position to take decisive action by the end of the financial year regarding the long-standing dispute with its Congolese subsidiary, says CEO Pieter Uys.
Uys was responding to questions about the matter during a trading update conference call yesterday afternoon.
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.
Uys says arbitration to resolve the conflict between the two shareholders has been put on hold for the meantime. He notes that no definitive decision has yet been made, but it may be possible that either Vodacom may buy out the operation, or CWN may want full ownership. Uys explains that Rothschild would assist in this decision.
Whatever the outcome, Uys states that Vodacom will likely be in a position to take decisive action by May. Meanwhile, Vodacom is still investing in the business and it remains fully operational.
Holding on
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 should try everything 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.”
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