Vodacom says the decision by the Competition Tribunal to block its tie-up with Remgro’s fibre business is a travesty, with the group vowing it will not walk away from the deal until it has explored all options.
“We are currently considering other strategic options, but I think it’s a travesty for SA that we’ve lost the opportunity for such a material investment, (with an estimated value) of between R14bn and R17bn, plus an additional R25bn in capex. So it’s a major, major loss for the SA fibre industry,” Vodacom CEO Shameel Joosub said.
Despite the setbacks, he said Vodacom was determined to get the deal over the line and would not entertain any other deals.
“We would not look at other M&A deals, given that we don’t want to be stuck with the competition authorities for another three years. So that is off the table,” Joosub said.
At the end of October, the Competition Tribunal announced its decision to block the merger of Vodacom and Maziv’s fibre business, sending shock waves through SA’s telecommunication industry.
The proposed merger would have seen Vodacom take a 30% stake in Maziv, which houses Remgro’s fibre units Vumatel and Dark Fibre Africa — together worth an estimated R13bn — with the option of increasing the stake to 40%.
The head of SA’s largest mobile operator believes fibre investment requires co-investment, or at least the pooling of resources, to get it right. The company sees no better partner and is not open to other deals.
“We were clear that we think that the opportunity around co-build is better than over build. We would like to cover the rest of the country [in fibre],” he said during a media briefing on Monday.
As with the R10bn spent annually by Vodacom and rival MTN in recent years to cover 99% of the country with their mobile networks, a similar effort is needed in fibre, coming at huge cost. As such, operators are finding ways to pool their resources and share the risk.
The tribunal is yet to give its reasons for not allowing the deal to go through.
“We’re still waiting for the reasoning. Apparently it can take up to two months for the reasoning to come out. If they can release the reasoning quicker, that would help if we do go to appeal,” Joosub said.
This comes as Vodacom reported lower headline earnings per share (HEPS) at the halfway stage, largely due to currency depreciation in Ethiopia and one-off costs in its international business. HEPS for the six months to end-September declined 19.4% to 353c. The currency depreciation in Ethiopia accounted for 53c a share, Vodacom said.
Revenue was 1% higher on a reported basis at R73.5bn, but was up 10.4% on a normalised basis, which adjusts for foreign currency fluctuation on a constant currency basis and excludes the effect of merger, acquisition and disposal activities. Group service revenue growth was 9.9% on a normalised basis, at the higher end of the group’s medium-term target. Financial services revenue rose 7.8%, and by 17.6% on a normalised basis, to R6.7bn, contributing 11.4% to group service revenue.
Group earnings before interest, tax, depreciation and amortisation fell 2.7% to R26.6bn, but grew 8.5% on a normalised basis. An interim dividend of 285c a share was declared compared with 305c a year ago.
Joosub is pleased with the way in which the Egyptian business navigated its way through a material currency devaluation to produce R13bn in service revenue.
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