Vodacom’s eastern pivot
Faced with a heavily saturated domestic market, hamstrung by an anaemic economy, Vodacom is turning its attention to business outside South Africa’s borders. Its glowing red logo has long shone like a beacon over downtown Johannesburg from a giant advertisement atop Ponte City, the tallest residential building in sub-Saharan Africa.
With more subscribers than any other mobile operator in South Africa, the firm is dominant on its home turf – perhaps too dominant, according to the country’s competition commission, which on 4 October announced an investigation into Vodacom’s exclusive contract to provide services to the government.
The company sees dynamic, fast-growing East Africa as a lynchpin of its growth strategy. In August, Vodacom Group wrapped up its R34.6bn ($2.6bn) acquisition of a 35% stake in Safaricom, the leading communications firm and mobile operator in Kenya, from parent company Vodafone.
The deal took the form of an equity swap, with Vodacom issuing 226.8m new shares to UK-based Vodafone, which is seeking to divest from African companies in order to look for a tie-up in Europe. Under the terms of the deal, Vodafone will retain a 5% holding in Safaricom, while the Kenyan government will keep a 35% stake.
Photo courtesy of Erik Hersman.