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Vodacom’s iBurst sale opens way to licence
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Thabiso Mochiko
Business Day
Tuesday, May 18, 2010
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Vodacom plans to dispose of stakes in two subsidiaries that have been shrouded in controversy over the past year.
It said yesterday it would sell its 24,9% stake in internet service provider iBurst to enable it to apply for a similar licence from the regulator. Former CEO Alan Knott-Craig was accused of a conflict of interest as his son was the MD of iBurst.
In the other venture, Vodacom said it would withdraw from the Democratic Republic of Congo if it failed to resolve its dispute with its partner Congolese Wireless Network and if the operating conditions there do not improve. If it pulls out, it will be the second failure in Africa after a disastrous venture in Nigeria more than five years ago.
Vodacom bought into iBurst’s parent company WBS four years ago to get access to lucrative and scarce spectrum. It spent about R100m to build base stations for iBurst.
Now Vodacom wants to apply for a spectrum allocation of its own, and its investment in iBurst could prevent it from doing so.
Vodacom CEO Pieter Uys said yesterday it was in discussion with potential buyers. “Our strategy (to sell iBurst shares) is purely driven by spectrum. But we will continue to have a relationship with iBurst,” he said.
In the Congo, Vodacom is involved in a bitter quarrel with Congolese Wireless Network over funding of their joint venture, Vodacom DRC.
The matter is in arbitration after the two failed to resolve several areas of disagreement.
The Congo business has declined in the past year because of tough trading conditions. Vodacom has put the brakes on investments in the Congo until the dispute over funding for the business is resolved.
Uys said although there were growth opportunities in the Congo, “we want a stable environment. Over the years I have been positive and still positive about prospects in the Congo,” he said.
Uys said if regulatory matters, tax problems and its shareholding impasse could not be resolved “we will have to call it a day … and move to something else”.
He said industry players would have to work closely to resolve regulatory issues such as tax. “When we deal with one regulatory matter the next one comes and there is a need for the industry to come together to ensure a stable tax regime. We would like to have resolved most of the issues soon,” he said.
In the year to March Vodacom was hit by a tax of $35m in the Congo, which dragged down earnings. Vodacom has 3,3-million customers in the country, down from 4,1-million in the previous year.
Spiwe Chireka, an analyst at Frost & Sullivan, warned that market-related issues in the Congo could continue affecting the growth of Vodacom there.
Analysts have previously said that Vodacom was unlikely to pull out of the Congo because it wanted to maintain its footprint in Africa. They said it had to sustain and grow what it had rather than shrink, because new growth opportunities were few.
Although Vodacom has been evaluating opportunities, it was not prepared to overpay, Uys said.
Andrew Kingston, an equity analyst at Sanlam Investment Management, said Vodacom seemed to be more “level-headed post the Gateway acquisition”.
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