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What next for Vodacom?
 
Dave Marrs Business Day Tuesday, May 18, 2010
 
VODACOM has upped its dividend and investors cheered. Yet behind this happy story is something of a conundrum for Vodacom. The group revealed it did have discussions with Kuwait’s Zain over its African assets. Bharti Airtel has bid for these assets at $9bn.

CEO Pieter Uys argued that as Vodacom was trading on an earnings before interest, depreciation and amortisation multiple of about five, it was not prepared to pay more than 10 for the assets.

The question is whether this is not another example of Vodacom’s traditional underestimation of the African market — an underestimation that has allowed rival MTN to outpace it in the expansion stakes. Vodacom claims its higher dividend, and perhaps the promise of a share buyback to come, will not prevent it from making acquisitions.

But it looks suspiciously like the company is running out of road. You can’t help noticing that new subscriptions in SA are down by 1,9-million to 26,3-million. Even with all the registration problems, that’s a lot of customers to lose.

 
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