Vodacom is seeking to bolster coverage of its African operations through an infrastructure sharing deal, which it hopes will help it keep a lid on costs at a time when revenue is increasingly under pressure.
The operator, SA's largest, is in the early stages of talks with Bharti Airtel and Millicom International Cellular, says a source with knowledge of the deal. No monetary value for the pooling of towers is yet available.
Vodacom's move, which analysts note makes perfect sense, has been a long time coming and is not a first in an industry that is seeking to bolster top line growth through additional subscribers and data services, while also keeping a lid on costs.
Not alone
Other African giants such as MTN, the continent's largest operator, and Bharti previously entered into deals to dispose of towers. In December, Bharti Airtel sold another 1 100 towers in two of its African operations to IHS.
This move followed its September deal with Eaton to sell that company 3 500 towers in six African countries, as well as its July announcement to sell about 3 100 masts in four African countries to Helios Towers Africa. The sales are part of the Indian group's plan to divest most of its more than 15 000 towers in Africa in a process that sources have said could raise up to $2 billion.
In September, MTN sold off its Nigerian towers to a company to be jointly owned by it and IHS in a deal apparently worth R20 billion. About two years ago, Vodacom also entered into a tower deal in Tanzania.
Vodacom spokesman Richard Boorman, while not commenting on the current deal, notes the operator looks at infrastructure sharing where feasible as a way of containing costs and extending the reach of its networks.
The way to go
Ovum analyst Richard Hurst notes infrastructure sharing "makes sense" because of the challenges operators face in supporting infrastructure in Africa due to power issues. He notes Vodacom's move has been a long time coming, and the company has been watching the market and realised sharing is "the way to go".
Hurst says the deal, should it be inked, would make it more cost-effective for Vodacom to roll out connectivity, which should enable it to be more competitive. Africa - Tanzania, Mozambique, the Democratic Republic of Congo and Lesotho - currently accounts for 20% of Vodacom's revenue, but almost half of its customer base.
Vodacom CEO Shameel Joosub has said the company aims to grow revenue from its African operations to be on par with its subscriber base. Hurst says to boost income from the continent, Vodacom needs to boost capacity and push data, which would require more capital spending if it did not enter a tower deal.
The operator, which grew revenue only 2.3% to R37.5 billion in the first half of the year, spent R1.7 billion on capital expenditure in its international operations in the same period. Turnover from its international operations grew 13% to R7 billion.
BMI-TechKnowledge telecoms sector specialist Tim Parle adds infrastructure consolidation is "the way to go" in Africa to grow market share, noting Bharti is master of the low-cost game.
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