Suggestions have been raised that the Special Investigating Unit probe into Telkom’s affairs – ordered by President Cyril Ramaphosa – might be retaliatory, punishing the company for collapsing his ambitions to urgently release radio frequency spectrum.
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Telkom’s botched expansion into Nigeria and Mauritius almost 16 years ago has come back to bite the fixed-line operator. It is now caught up in a damaging dust-up with President Cyril Ramaphosa and SA’s elite law enforcement body.
In a surprise move, Ramaphosa asked the Special Investigating Unit (SIU) to launch an investigation into Telkom’s affairs for possible corruption and malfeasance relating to, among other things, its dealings in Nigeria and Mauritius going as far back as 1 June 2006.
The investigation would be wide-ranging, according to a Government Gazette notice that was authorised by Ramaphosa on 14 January and published on 25 January.
The SIU is an independent law enforcement body that investigates corruption and other forms of wrongdoing relating to state institutions, public funds and state assets. The SIU is also tasked with recovering monies lost or issued under questionable circumstances.
Its investigation into Telkom would probe “serious maladministration” regarding the company’s affairs, “improper or unlawful conduct” by its employees or officials, “unlawful appropriation or expenditure” of public funds, “unlawful, irregular or unapproved” transactions and “intentional or negligent” loss of public money.
On Wednesday, Telkom responded to Ramaphosa’s move, saying it was awaiting further clarity on the scope of the SIU’s investigations into the company’s affairs and alleged wrongdoing.
In a statement, Telkom said it “will deal with the investigation on its merits in the appropriate forum, in the appropriate manner, at the appropriate time”.
Telkom also offered a brief defence against any allegations that might arise from the SIU investigation.
“Telkom follows robust corporate governance principles and has done so in executing the Telkom strategy to consolidate its operations in South Africa.”
Since the SIU’s investigation was made known on 25 January, Telkom’s share price fell by 3.7%, wiping out nearly R1-billion from its value on the JSE.
Ramaphosa is invested in the affairs of Telkom because it is partially state-owned, with his government having a 40.5% shareholding in the company. As a shareholder, the government and, in turn, the fiscus, receives regular dividends declared by Telkom. It’s a rare benefit to the government, considering that most basket case state-owned entities don’t enhance the fiscus but rather deplete it through taxpayer-funded bailouts.
The timing of the SIU probe is curious for several reasons. It is not clear what prompted Ramaphosa to order the SIU investigation so many years after Telkom’s ill-fated expansion into east and west Africa, which cost the company and shareholders billions of rands in losses.
Telkom’s Africa expansion
From the late 1990s into the early 2000s, Telkom wasn’t the profitable company that it is today. During this period, Telkom was a lossmaking entity and failed to live up to its original mandate of leading South Africans into the fledgling digital age. It was a time when many consumers were ditching their fixed-line connections for cellphones.
Telkom was also in the process of changing its share ownership structure to embrace strategic equity partners from the private sector. These partners would own a portion of the company’s shares and, in the process, offer their skills to modernise Telkom.
In 1997, SBC Communications and Telekom Malaysia bought 30% of Telkom, a transaction worth about R5.5-billion at the time. SA’s government further reduced its stake in Telkom when the company was listed on the JSE in 2003.
In 2007 – four years after listing – Telkom, led by CEO Papi Molotsane, launched a strategy to expand the company’s operations in the rest of Africa to find new revenue streams and stem the tide of financial losses. Telkom had no track record or experience outside its South African home market.
Molotsane and the Telkom board first identified Nigeria and then Mauritius for expansion. In March 2007, Telkom acquired a 75% stake in Nigeria’s Multi-Links Telecommunications for $280-million (about R9.8-billion at the time). By January 2009, Telkom took full control of the company by buying the remaining 25% of the company for $130-million.
The investment turned into a financial disaster as Telkom was accused of overpaying for a dud.
A KPMG valuation found that Telkom’s purchase of the remaining 25% stake in Multi-Links was worth $44-million – and not the $130-million the company shelled out.
Operationally, Multi-Links was also facing problems within Nigeria’s fiercely competitive telecommunications industry. Between 2009 and 2010, the company pencilled in a financial loss of about R1.5-billion.
Telkom wrote off about R5-billion in the value of Multi-Links, confirming that it overpaid for its Nigerian adventure. Telkom exited Nigeria in 2010 by selling its entire Multi-Links shareholding to Helios Towers Nigeria for $10-million – a far lower value than the $410-million it forked out to participate in the west African country.
Shortly after making a foray into Nigeria in 2007, Telkom targeted Mauritius by buying internet businesses iWayAfrica and Africa Online Mauritius. The business suffered the same fate as Multi-Links and performed poorly, resulting in Telkom exiting the investment in 2013.
Now, Ramaphosa and his government are baying for Telkom to pay for their past sins. The SIU investigation will probe, among other things, “maladministration in the affairs of Telkom” regarding the sale or disposal of Multi-Links, iWayAfrica and Africa Online Mauritius.
Possible punishment for spectrum fight
Telkom has relentlessly dragged SA’s telecommunications regulator and the government to court to block efforts to auction and release radio frequency spectrum.
Since early 2021, Telkom has been at the forefront of picking apart the government’s spectrum auction process, calling it unfair and unlawful.
Read more here
The release of new spectrum, which hasn’t happened since 2004, is part of Ramaphosa’s structural reform measures to grow the economy, create jobs and unlock private sector investments. But, with Telkom standing in his way, Ramaphosa has been unable to release spectrum for nearly two years.
Some market watchers have suggested that the SIU probe into Telkom’s affairs might be retaliatory, punishing the company for collapsing Ramaphosa’s spectrum release ambitions.
Telkom recently dropped part of its spectrum court case. It’s possible that the decision to authorise the SIU investigation took place prior to this move.
In any event, while Telkom is not standing in the way of the spectrum auction on 8 March, it has indicated it remains opposed to the process as a whole. DM/BM
The Independent Communications Authority of South Africa (Icasa) tore into Telkom on Wednesday after the network operator filed papers in the Pretoria High Court to once again block the auctioning of sought-after radio frequency spectrum.
Spectrum is the raw network capacity cellular network operators use that allows mobile devices to communicate with their towers.
South Africa’s mobile carriers maintain that if they get access to more spectrum, they can drastically cut data prices in South Africa while improving network coverage and quality.
Telkom’s concerns with Icasa’s proposed spectrum auction are manifold and include — auctioning spectrum that E-tv refuses to give up by the deadline, not considering Vodacom and MTN’s market dominance, and not licensing a national wireless open-access network at the same time.
“Telkom seeks to, yet again, derail the much anticipated and urgently needed licensing process for the International Mobile Telecommunications spectrum earmarked for auctioning in March this year,” Icasa stated.
The auction was scheduled to happen on 8 March 2022.
“Telkom’s urgent application is supported by a 123-page affidavit, with a total of almost 700 pages of annexures, undoubtedly drafted over several days shortly after the publication of the Invitation To Apply (ITA) for the IMT licensing process on 10 December 2021,” said Icasa.
The industry regulator said it is not surprised by Telkom’s “relentless resort to litigation”, as this conduct stretches back seven years or more.
“Telkom appears hellbent on stalling the Authority’s every effort to licence the high demand spectrum that the sector, country, and our economy so badly needs,” Icasa said.
It said the public interest demands that the licensing of the high-demand spectrum could not be delayed any longer.
“Narrow and selfish commercial interests should give way to the overriding public good of cheaper data, universal access to efficient and reliable connectivity, and high-speed broadband transmission.”
Willington Ngwepe, Icasa CEO
Icasa explained that it received a letter from Telkom on the afternoon of 31 December 2021. Vodacom also sent a confidential letter to the regulator on 1 January 2022.
“Both letters raised varying concerns regarding the ITA process and requested the Authority to consider them,” stated Icasa.
“Telkom requested the Authority to respond by no later than Tuesday, 4 January 2022, failing which it would approach the court on an urgent basis for relief.”
Icasa said it responded on Monday, 3 January to both companies. It told them that it planned to respond comprehensively by Friday, 7 January 2022, and undertook to consider the various concerns raised.
Despite this undertaking, Telkom elected to file papers.
“Telkom launched what can only be seen as a pre-emptive strike by filing an urgent application with the High Court to stall the ITA process and the auction intended for March 2022,” said Icasa.
Icasa said that in light of the voluminous court papers Telkom served on it late yesterday, 4 January, it can no longer respond to the respective parties’ correspondence by Friday.
“It is almost both necessary and reasonable for the Authority to study the court papers, consult with its lawyers, and take an informed and carefully considered decision before responding to Telkom and Vodacom’s correspondence,” Icasa stated.
“The Authority will, given the prevailing circumstances, respond to the correspondence in due course.”
In the meantime, Icasa emphasised the ITA published on 10 December 2021 with its timetable remain intact.
“The Authority’s lawyers will deal with the litigation instituted by Telkom and advise on the way forward. The Authority will henceforth refrain from debating in the interim the merits or demerits of the case in the media.”
Telkom has filed an application asking the Gauteng High Court to review and set aside the Invitations To Apply (ITAs) published by the Independent Communications Authority of South Africa (ICASA) on 10 December 2021. The application includes an urgent interdict to prevent ICASA from processing any applications until the review is heard.
Telkom has serious difficulties with ICASA’s decision to again include sub 1 GHz spectrum in the intended auction. This band is currently the subject of a legal challenge brought by e-tv. The outcome of the legal proceedings, set to be heard starting on 14 March 2022, will have a material impact on the availability of spectrum in this band.
According to Telkom’s Group Executive: Regulatory Affairs and Government Relations, Dr. Siyabonga Mahlangu, the timing of the ITA is ill-conceived as the auction process does not consider the timing and impact of the findings of the legal challenge.
“This is further compounded by the lack of clarity around the WOAN as the ITA for the WOAN has not been published,” Mahlangu continues.
ICASA has indicated that it wishes to reconsider the timing of the licensing of the WOAN. This has serious consequences for the ITA that was published in December 2021. Potential bidders like Telkom are not able to take a holistic view of the availability and conditions of access for total available spectrum before making their submissions for the auction.
“We would have hoped that the withdrawal of the previous ITA and referral of the matter back to ICASA for reconsideration in terms of the court order during September 2021 would have been followed by extensive consultation to understand the challenges the previous ITAs presented and avoid repetition of these in the current version,” says Mahlangu.
“Unfortunately, this did not happen and regrettably, we find ourselves in this position once again.”
“The issue of a competitive landscape is key for the entire sector and not only Telkom. The impacts of a further skewing of competition in this market, through ill-considered licensing of spectrum, will be long lasting and negatively affect the availability of services and prices to consumers,” he concludes.
US mobile chip giant Qualcomm has gone big on the buzzwords at this year’s CES tech show, claiming its new AR collaboration with Microsoft has something to do with the metaverse.
‘Qualcomm Announces Collaboration with Microsoft to Expand and Accelerate AR to Usher in New Gateways to the Metaverse,’ heralded the press release. New gateways eh? Sounds intriguing. Both companies are ‘believers in the metaverse’, were told, thus positioning it as some kind of mystical phenomenon rather than a rebrand of the AR/VR paradigm the tech industry has been trying to get off the ground for years.
Qualcomm itself coined the term ‘XR’ (extended reality) a while back, as a way of trying to generate demand for a new family of chips designed to cater to that sort of thing. The fact that it’s now resorting to this partnership with Microsoft seems to be an indication that it thinks the whole scheme needs a boost.
“This collaboration reflects the next step in both companies’ shared commitment to XR and the metaverse,” said Hugo Swart, GM of XR at Qualcomm. “Qualcomm Technologies’ core XR strategy has always been delivering the most cutting-edge technology, purpose-built XR chipsets and enabling the ecosystem with our software platforms and hardware reference designs. We are thrilled to work with Microsoft to help expand and scale the adoption of AR hardware and software across the entire industry.”
“Our goal is to inspire and empower others to collectively work to develop the metaverse future – a future that is grounded in trust and innovation,” said Rubén Caballero, Corporate VP of Mixed Reality at Microsoft. “With services like Microsoft Mesh, we are committed to delivering the safest and most comprehensive set of capabilities to power metaverses that blend the physical and digital worlds, ultimately delivering a shared sense of presence across devices. We look forward to working with Qualcomm Technologies to help the entire ecosystem unlock the promise of the metaverse.”
All this talk of alternative realities is a bit unnerving, isn’t it? And the fact that the Microsoft gentleman felt the need to emphasis things like trust and safety only serves to strengthen that impression. Here’s Qualcomm’s CES announcement fest, with one in question starting at the 16:50 mark, followed by some videos illustrating the Microsoft vision of all this. You decide for yourself what a great idea it all is.
World Mobile, who recently announced their plans to make low-cost, high-quality internet access available to all Zanzibaris, has signed a partnership with the Ministry of Education and Vocational Training in Zanzibar to provide free, unlimited internet to schools across the region.
World Mobile has already connected Forodhani, Benbella, Kiwengwa Schools which comprise more than 1,000 students, and has plans to connect 10 more schools by the end of January 2022. The target is to connect all schools in the region by the end of 2022. In addition to connectivity, World Mobile has installed some laptops for teachers and students. Roll out will be achieved through a close collaboration between World Mobile and the Ministry of Education and Vocational Training to install solar, telco and power equipment efficiently in schools.
Providing access at schools will also enable World Mobile to supply connectivity to the local areas around them, boosting the local economies. Revenues generated from this will benefit the schools directly as they become node operators on the World Mobile network.
Mr. Simai Mohammed Said, Minister of the Ministry of Education and Vocational Training in Zanzibar said: “We are proud to broaden the partnership between the Ministry and the private sector to enhance how we operate in a more digital world. This partnership will improve educational outcomes for our students, which will benefit Zanzibar for generations.”
RJ Katunda, World Mobile cofounder added: “By providing this connectivity to schools we will also connect the schools to the Ministry’s EMIS (Educational Management Information System) platform, which enables resource management to improve school effectiveness. This will improve how schools operate and will benefit students and teachers. We’re also pleased to give the local areas around the schools a boost with affordable, higher quality connectivity.”
Micky Watkins, CEO of World Mobile said: “World Mobile’s approach is based on the Sharing Economy where all those taking part will benefit from network’s activities. We are proud to show how this will work in Zanzibar for people generally and now for schools. We plan to expand our network into other areas including healthcare, all public spaces, airports, ferry terminals and the blue economy.”
Africa-based telco group MTN is waving goodbye to the CEO of its South African unit Godfrey Motsa.
South Africa is the group’s second-largest opco by service revenue after Nigeria, generating ZAR19.25 billion in the first half of this year – almost a quarter of MTN’s group revenue. It also accounts for nearly a third of MTN Group’s data revenue. Impressive given MTN has presence in 20 markets.
After five years in charge of one of the jewels in MTN’s crown, Motsa will step down on 1 January 2022. His replacement is Charles Molapisi, a long-serving MTN exec who currently holds the position of chief technology and information officer.
In addition, Ebenezer Asante, who until now has been CEO of MTN Ghana, has been appointed to the newly-created role of senior vice president of markets.
These are the latest in a string of recent senior executive changes at MTN. Last week the telco revealed it has brought in a new face to accelerate its mobile financial services strategy. Hermann Tischendorf took up his position as MTN’s new CTIO for Digital and Fintech (DigiFin) at the beginning of the month.
His responsibility is to help grow MTN’s mobile remittance business (the group currently has more than 22 million mobile money customers in 15 markets), and to introduce new products and services. Tischendorf joined MTN from consumer loan provider 4Finance Group, where he served as CTO, so it’s not unreasonable to suggest that he might have some mobile lending services up his sleeve.
“We are delighted to have a seasoned executive of Hermann’s calibre joining our growing DigiFin team,” said MTN Group chief digital and fintech officer Serigne Dioum. “He brings the skills and experience that will accelerate innovative digital and fintech advancements in line with our strategic intent of leading digital solutions for Africa progress.”
Tischendorf’s appointment came just a couple of months after MTN named Adekunle Awobodu – who has previously served as CFO of MTN Nigeria and CFO of Irancell – as the CFO for the DigiFin business.
It will be interesting to see what services this newly-formed team comes up with.
Tags: Ebenezer Asante, Godfrey Motsa, MTN
The Independent Communications Authority of South Africa (Icasa) will hopefully present a solution to the legal dispute over precious cellular network capacity by the end of the day.
This is according to Telkom CEO Sipho Maseko, who spoke to SABC News about the meeting Icasa called with South Africa’s major mobile network operators.
MyBroadband also spoke to an industry source with knowledge of what was discussed at the meeting. They said that Icasa committed to issuing a notice on Wednesday or Thursday this week.
Vodacom, MTN, Telkom, Cell C, Rain, and Liquid Intelligent Technologies met with Icasa on Monday afternoon to discuss the regulator’s decision to claw back radio frequency spectrum assigned at the start of South Africa’s Covid–19 epidemic.
Spectrum represents raw network capacity and is the lifeblood of mobile operators like Vodacom, MTN, Telkom, Cell C, and Rain.
Icasa assigned the spectrum on an emergency, temporary basis under the National State of Disaster regulations for the Covid–19 pandemic.
It said that the temporary spectrum would be valid for three months or would expire three months after the State of Disaster ended — whichever came first.
After extending the temporary assignments every quarter, Icasa issued a notice at the end of August informing the networks that they must return the spectrum on 30 November.
This led to an outcry, with MTN and Telkom warning that Icasa’s decision would have catastrophic consequences on South African end-users.
Willington Ngwepe, Icasa CEO
Together with other operators, MTN and Telkom explained that data traffic on their network remains much higher than their pre-pandemic levels.
They argued that revoking the temporary spectrum would cause significant network congestion and could even lead to price increases when South Africa could ill-afford it.
The two operators ultimately filed papers in the Pretoria High Court to block Icasa from taking back the temporary spectrum.
To de-escalate the situation, Icasa CEO Willington Ngwepe sent letters to Vodacom, MTN, Telkom, Cell C, Liquid Intelligent Technologies, and Rain, inviting them to an online meeting on Monday at 14:00.
Icasa has proposed an amendment to the current Covid–19 regulations that radio frequency spectrum issued on an emergency basis be re-issued under a new “provisional assignment” scheme.
The new applications will cover the 700MHz, 800MHz, 2300MHz, 2600MHz and 3500MHz spectrum bands.
Icasa’s proposal is in-line with communications minister Khumbudzo Ntshavheni’s comments in October that government was considering “interim” spectrum assignments to bridge the gap between the end of November and March next year.
March 2022 is a significant date because that’s when Icasa hopes to have concluded an auction and licensing for the sought-after spectrum.
According to MyBroadband’s source, the meeting with Icasa was not a consultation.
The regulator was simply informing South Africa’s wireless carriers what to expect in the coming week.
It is unclear precisely what regulatory process Icasa would follow, but in essence, it will ask operators to give back the temporary spectrum and reapply for frequencies to tide them over until March next year.
While the spectrum auction is scheduled to happen in March 2022, it is worth noting that industry insiders believe the deadline is unrealistic and is setting Icasa up for failure.
It is hoped that Icasa’s proposed solution will consider the scenario that the spectrum auction needs to be delayed.
Our source said that Icasa did not give much attention to the spectrum auction during its discussion with operators on Monday.
This caused concerns that Icasa will repeat many of the same mistakes it made with its previous attempt to auction the spectrum.
MyBroadband contacted Rain, MTN, and Liquid for feedback, and they said that they could not comment on the meeting with Icasa at this time.
Vodacom said it would provide feedback as soon as it could.
“We are supportive of ICASA proposing an out of court remedy,” said Rain CEO Brandon Leigh.
“Unfortunately, I can’t comment further at this stage.”
Liquid said that the meeting was held on a confidential basis and, as such, it would be inappropriate to comment or report on the discussions.
“It was held in a collegial atmosphere with a focus on finding solutions.”
, a Pan-African telecommunications services provider, has announced the new appointment of Tejpal Bedi to the role of Managing Director (MD) and Regional Head of Sales for the ENEA region, effective from 1 November 2021.
According to a statement from the firm, Tejpal Bedi joins SEACOM with a wealth of experience in leading and driving high performing organisations within the telecommunications and ICT sectors in East Africa. Before joining SEACOM, he was MD of CloudSmiths East Africa, a position he has held since 2015.
Prior to this, he held the position of MD for Internet Solutions East Africa where he transformed (Iconnect) into a global player in the industry, and also founded the training and consulting company, Cambridge Africa, which is the IBM training partner across seven African countries.
Bedi has a degree in Business Studies from the University of Wales, UK, and an MBA from the University of Leicester, UK. He also serves as a Director at TESPOK, the body that manages the Kenya Internet Exchange Point and the voice of the Kenyan telecommunication industry.
Bedi is also the past Chairman and Founder of Kenya IT and Outsourcing Service (KITOS), providing policy and direction within the IT-enabled services industry and government.
Commenting on the new appointment, Chief Sales and Marketing Officer at SEACOM Group, Steve Briggs, said, “We are delighted to welcome Tejpal Bedi on board. We have every confidence that his wealth of experience will enable us to drive growth in the region, and help us to better serve our wholesale and enterprise clients in this key region. This is an exciting time for Tejpal and the SEACOM Kenya team as a whole.”
Vodafone on Wednesday reorganised the ownership structure of its African operations with a multi-billion-dollar deal.
Its South African unit, Vodacom, has agreed to acquire a 55 percent stake in Vodafone Egypt. It will fund the ZAR41 billion ($2.71 billion) deal with ZAR8.2 billion in cash and by issuing 242 million new shares priced at ZAR135.75 each. The deal will increase Vodafone’s stake in Vodacom to 65.1 percent from 60.5 percent.
Vodafone said in a regulatory filing that the reorganisation will simplify the management of its African holdings. It also said that it diversifies Vodacom’s portfolio, giving it exposure to an exciting growth market; meanwhile, Vodafone Egypt will be able to accelerate its growth in the financial services and IoT markets thanks to closer ties to Vodacom.
“Vodafone Egypt is ideally positioned to capture growth in a burgeoning ICT market, which means the proposed acquisition provides our shareholders with an exciting revenue and profitability diversification opportunity and the potential to accelerate the group’s medium-term operating profit growth potential into double digits,” said Vodacom CEO Shameel Joosub, in a statement.
According to Vodacom, Vodafone Egypt currently as 43 million consumer and enterprise customers, and a revenue market share of 43 percent. Its Vodafone Cash service is also the clear leader in the mobile-wallet market, capturing a 90 percent share of transactions as of August, according to Egypt’s telco regulator.
Joosub also pointed out that the acquisition increases Vodacom’s population coverage to more than half a billion people, and more than 40 percent of Africa’s GDP. “We intend to provide an update on our medium-term targets at our full year results, which will be reported in May 2022,” he said.
The deal marks a considerable change of direction for Vodafone. Last year it was on the cusp of selling Vodafone Egypt to Saudi Telecom Company (STC), in line with group CEO Nick Read’s portfolio optimisation strategy. Vodafone decreed in early 2020 that Egypt was no longer a good fit for the business, and so it struck a $2.4 billion deal to sell its 55 percent stake to STC.
The pandemic delayed the due diligence process by a few months but even so, Vodafone insisted in September last year that the sale was still on. Then in December, with very little fanfare and not much explanation, Vodafone abruptly announced the deal was off. With Wednesday’s deal to fold its 55 percent Vodafone Egypt stake into Vodacom, the assets will become assimilated more closely at group level, and therefore potentially harder to hive off and sell in future.
Meanwhile in a separate announcement, Vodacom also agreed to contribute its fibre assets into a new joint venture with Community Investment Ventures Holdings (CIVH). CIVH owns and operates telco networks via its wholesale FTTP unit Vumatel, and its metro dark fibre subsidiary, Dark Fibre Africa (DFA). Vumatel’s network passes 1.2 million homes in South Africa, while DFA boast 13,000 km of metro dark fibre.
Under the deal, which is subject to regulatory approval, these assets will be combined with Vodacom’s business and consumer FTTP networks, and its B2B fibre transmission network to form a new entity called InfraCo. Those Vodacom assets, valued at ZAR4.2 billion ($278 million), together with a ZAR6 billion cash payment, will give the operator a 30 percent equity stake in InfraCo, with CIVH holding the remaining 70 percent. The agreement also gives Vodacom the option to increase its holding by 10 percent.
The result is that Vodacom and CIVH will each benefit from a larger fibre footprint and extra financial clout to invest in expanding coverage and capacity.
“Our agreement with CIVH aligns with Vodacom Group’s strategy to build high quality and resilient fixed and mobile networks with and through selected strategic partnerships across the African continent. It also supports Vodacom’s purpose-driven plan to assist the government in rebuilding the economy post-Covid,” said Joosub, in a separate statement.
The deal needs to be waved through by the competition authorities and the Independent Communications Authority of South Africa. In the meantime we’ll keep an eye out for rivals Telkom and MTN’s reaction to the idea that Vodacom’s share of the fibre market could soon get considerably larger.
Tags: Egypt, M&A, South Africa, Vodacom, vodafone
Vodacom Group will acquire a co-controlling interest, along with Remgro and New GX Capital, in a new entity made up of assets including Vumatel and Dark Fibre Africa.
On completion of the transaction, Vodacom will hold a 30% equity interest in a newly formed entity, provisionally called InfraCo, that will house the DFA and Vumatel assets as well as certain fibre assets that Vodacom will contribute into the new business.
DFA and Vumatel parent CIVH will hold a 70% co-controlling interest in InfraCo and existing CIVH investors including Remgro and New GX Investments will remain invested in CIVH.
Vumatel is South Africa’s largest fibre-to-the-home (FTTH) network operator, while Dark Fibre Africa provides fibre services in and between the country’s towns and cities.
Vodacom’s FTTH and fibre-to-the-business (FTTB) assets will be contributed into InfraCo. These assets will be open access in keeping with the Vumatel and DFA’s business models.
“We expect that Vodacom’s investment will accelerate South Africa’s fibre reach, network quality and resilience, fostering economic development and help bridge South Africa’s digital divide in some of the most vulnerable parts of our society,” Vodacom said in a statement to shareholders.
“Through Vodacom’s investment, InfraCo would accelerate and expand its lower and middle-income product offering to deliver affordable high-speed broadband access to a broader population segment, including small and medium sized enterprises.”
Vodacom explained that the transaction is structured into a number of steps, all of which would occur at completion upon receipt of regulatory approvals.
“This will result in Vodacom obtaining a 30% shareholding in InfraCo, where Vodacom will jointly control InfraCo alongside CIVH, which will hold the remaining 70% shareholding,” it said.
Step 1: CIVH will transfer all of its material assets and operations, including Vumatel and DFA, into a newly created entity, InfraCo.
Step 2: Vodacom will subscribe for new shares in InfraCo in return for R6-billion in cash.
Step 3: Vodacom will contribute its FTTH, FTTB and business-to-business transmission access fibre network infrastructure to the InfraCo, at a valuation of R4.2-billion, in return for new shares in InfraCo.
Step 4: Vodacom will acquire further (secondary) shares from CIVH sufficient to increase its shareholding to at least 30% in InfraCo at a pre-agreed formula.
“The value of the secondary purchase as outlined in step 4 is a function of the valuation of InfraCo as described and so cannot be pre-calculated with certainty. Based on Vodacom’s current expectations, including the date of closing and the InfraCo valuation, the secondary purchase is estimated to be approximately R3-billion. This would imply that the total purchase price paid by Vodacom, including the value of the transfer assets, equates to R13.2-billion.”
Vodacom also has an option, which is exercisable for 180 days following the transaction’s implementation, to acquire an additional 10% stake in InfraCo to increase its shareholding to 40% at the same implied valuation.
The transaction must not result in CIVH holding less than 50.1% of the InfraCo ordinary shares.
The proposed deal must also be approved by the Competition Commission, which could prove to be tricky, and by communications regulator Icasa.
For the year ended 31 March 2021, CIVH reported net assets of R8.7-billion and an attributable loss to shareholders of R1.1-billion.
Source: Tech Central