Vodacom is giving thought to kick-starting a new black economic empowerment (BEE) deal that TechCentral estimates could be worth as much as R20bn.
The JSE-listed telecommunications group is considering the option of a deal in large part to ensure it has access to the scarce radio frequency spectrum it needs to remain competitive.
About 6,25% of Vodacom SA’s equity is currently in black hands as a result of the group’s R7,5bn empowerment deal in 2008. It may have to sell a further 23,75% — worth roughly R20bn according to TechCentral’s calculations — to bring its BEE shareholding to 30% and ensure it is able to bid for new spectrum.
Alternatively, it may sell equity at group level.
Vodacom Group CEO Pieter Uys says it’s important that the group has a better empowerment rating than its main rival, MTN. “Last year, in terms of the scorecards, we were rated best in the sector, but once MTN has done its deal, we won’t be the best anymore.”
Uys is referring to MTN’s plan, the details of which were announced in July, to sell as much as 4% of the emerging markets-focused telecoms group’s equity in an R8,1bn deal.
He warns that slipping in the empowerment rankings could harm Vodacom’s performance in the future.
But he says Vodacom hasn’t begun work in earnest yet on a new empowerment deal. “We haven’t started yet, but to remain competitive we have to review our BEE position.”
It’s possible that government and the Public Investment Corp, both of which are significant minority shareholders in Vodacom (they have 13,9% and 4,2% respectively), could come to the party to assist in a new deal, Uys says. It’s possible the deal could be done at group level, rather than at subsidiary level.
The group currently holds 93,75% of Vodacom SA, with the rest held by black shareholders, including members of the black public who bought shares as part of the YeboYethu empowerment offer in 2008. The group is controlled by UK mobile phone giant Vodafone, with a 65% equity holding.
Uys says it appears likely Vodacom SA will have to increase its black shareholding if it’s going to be successful in securing access to new radio spectrum.
Two big chunks of spectrum are likely to be made available in the next few years, first in the 2,6GHz band, and later in the 800MHz band. The latter spectrum will be freed up once the country has migrated from analogue to digital terrestrial television, which must happen before the mid-2015 deadline set by the International Telecommunication Union.
Vodacom is keen to get access to frequency in both bands to provide the next generation of wireless broadband services.
Uys says it appears likely that the Independent Communications Authority of SA will require those interested in bidding for new spectrum to have at least 30% of their shareholding in black hands. This requirement is likely to appear in an invitation to apply for spectrum in the 2,6GHz band, which should be auctioned off in 2011.
“To really do what I believe is possible in the long term, to grow the broadband business and the company — and grow the economy off the back of better broadband — big companies like Vodacom will need more spectrum.”
Uys says if prices were to fall sharply — say, by 50% — and this resulted in a concomitant increase in the number of subscribers, Vodacom would require more spectrum to cope.
“It would be a sad day if we couldn’t continue to make a difference in the broadband space,” Uys says. — Duncan McLeod, TechCentral
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