Vodacom - acquisition of Gateway

Vodacom buys Gateway for $700m

Vodacom, South Africa’s biggest mobile operator which is half-owned by Vodafone of the UK, on Friday stepped up its plans to expand into Africa with the $700m acquisition of Gateway, a mobile network connection company that operates in 17 countries on the continent.

Peter Uys, incoming chief executive, said the purchase, to be funded with a mixture of local and foreign debt and cash, ”gives us a springboard to launch into the continent”.

”Many of our customers are becoming pan-African companies,” Mr Uys added. The deal is subject to regulatory approval.

Vodafone has long sought to make Vodacom, its joint-venture with South Africa’s state-controlled Telkom, its conduit to lucrative emerging African markets.

Buying Gateway, which primarily provides services to connect mobile services between different networks, will allow Vodacom to throw down the gauntlet to MTN, its South African rival currently the biggest operator in Africa.

However, Vodafone’s strategy to gain overall control of Vodacom through a purchase of some of Telkom’s stake appears to be bogged down.

Reports on Thursday suggested that a Nigerian telecoms magnate was seeking to buy Telkom’s 50 per cent interest in Vodacom to create a potential pan-African mobile giant. Telkom said it would issue a statement to the market shortly.

The government is believed to be keen to unload its stake in Telkom to the right buyer in part to spur its telecoms liberalisation drive.

Mvelaphanda Holdings, a black-empowerment investment group, is also in talks with Telkom that may see it buy the remainder of the business – the fixed line assets that would be left were the Vodacom stake to be sold.

Vodacom’s recent offering of shares to black investors valued the group at about R140bn. However, in a sign of the confusion surrounding the various permutations on a deal, such a valuation would make Telkom’s stake in Vodacom worth R70bn – greater than Telkom’s entire market capitalisation of R72.5bn ($9.4bn) even before its other assets are factored in.