Vodacom has won an estimated R5bn contract with the South African government as the national treasury seeks to cut costs, according to three people familiar with the matter.
The tender is to supply as many as 1,3m government employees for four years starting on 15 September, said the people, who asked not to be identified as details of the deal haven’t yet been made public.
If 400 000 government employees take up the service, the contract will be worth as much as R5bn over the duration of the deal, one of the people said.
“Vodacom is honoured by the national treasury’s decision to appoint us as a partner to government to deliver on the all-important task of enabling government to connect and communicate efficiently,” CEO Shameel Joosub said in e-mailed comments on Wednesday, without providing detail of the contract.
“Our substantial investment in infrastructure and innovative capability will now be at the disposal of the state.”
The decision is intended to save the national treasury money and have a reliable telecommunications supplier, according to one of the people. Finance minister Pravin Gordhan said in his budget speech in February that the reduction of government costs is a priority. The state could save R25bn/year through “belt tightening”, he said, including R500m from changing cellphone policies.
For Vodacom, the deal will help increase its number of customers who pay for voice and data on a monthly basis, rather than on so-called pay-as-you go deals. The Johannesburg-based company had 35,1m South Africa subscribers at the end of June, of which 30,1m were lower spending, pre-paying customers.
Vodacom is 65% owned by Newbury, England-based Vodafone Group. The shares gained 1,2% by the close in Johannesburg on Wednesday, valuing the wireless carrier at R232bn. — (c) 2016 Bloomberg LP
