Local market may be cool towards Vodacom sale, says analyst

Vodacom shares rocketed on Thursday amid growing speculation that its UK parent may be looking to sell the business.

Bloomberg reported that Vodafone is working with advisers on extracting more value from its 65% stake in Vodacom, citing people who asked not to be identified because the matter is private.

The company’s stock rose as much as 10% on the news but the gains were pared to just more than 4% by the close, valuing the shares at R130.02 apiece.

Vodafone shares also rose to close the day at 102.8p in London, up 3.6%.

The initial stage considerations include merging the business with other operators, selling some assets in certain markets, or even selling a stake in the company, the people said.

Vodafone’s stake in SA’s largest mobile operator has risen to 65.1% from 60.5% after a $2.73bn (about R48bn) deal in which Vodacom took over the UK operator’s business in Egypt. The British company has been invested in Vodacom since its founding in 1993 and ran the company in an equal partnership with Telkom until 2008.

Vodacom has a market value of about R270bn on the Johannesburg bourse after falling about 13% in the past 12 months. Vodafone is down more than 25% in the same period, valuing it at £28.1bn (about R583bn).

While Vodafone has always seen the African unit as a core asset, the exercise shows that it is willing to study various options to stem a decline in its shares. Billionaire John Malone’s Liberty Global disclosed a 4.9% stake in Vodafone on Monday, joining other investors, French billionaire Xavier Niel and state-backed Emirates Telecommunications Group, formerly known as Etisalat and now called e&.

In December, it was reported that Vodafone is considering selling its stake in Vodacom to e&, whose CEO, Egyptian national Hatem Dowidar, has previously held roles at Vodacom, Vodafone Group, and Vodafone Egypt.

At the time, analysts told Business Day they were not convinced the deal would proceed, though a successful transaction would be worth in the region of R142bn.

Perhaps Vodafone is waiting for a large cheque to make it reconsider is position on Africa.

“As the market saying goes: anything is for sale if the price is right,” said Peter Takaendesa, head of equities at Mergence Investment Managers.

“Vodafone continues to say that Vodacom is a core asset so someone has to pay them very well to change that view. The challenge is that authorities and investors in SA may not be supportive of a full takeout of Vodacom and a delisting of the shares,” Takaendesa said.

Abu Dhabi-based e& has been making strenuous inroads in Africa over the past decade.

It has also been steadily building its stake in Vodafone over the past 10 months to 13% last month. With Bloomberg

gavazam@businesslive.co.za