Congo fever for Vodacom
Vodacom says it will fight a court ruling that it must pay $21-million in consultancy fees or submit to the mandatory sale of its shares in its joint venture in the Democratic Republic of Congo.
The company yesterday posted a modest 8% rise in full-year earnings, just short of expectations after a hefty tax bill and high capital expenditure.
CEO Pieter Uys said Vodacom was appealing against the recent Congolese court ruling that it must pay a local firm, Namemco Energy, $21-million in consultancy fees or face the sale of some of its stake in its local business by June 3.
"The bottom line is that we will not let that asset go," he said.
Vodacom had already been locked in a bruising battle with its local partner in the DRC, Congolese Wireless Network, about fees. It had been looking at options to exit the business but that process has been halted by Namemco's lawsuit.
"This is looking like a bit of a messy situation for Vodacom," said Lehlohonolo Mokenela, a research analyst at Frost & Sullivan.
"One would hope that it would be resolved by now. It would be wise to find a resolution quite quickly; it's seeming to have quite an unsavoury effect on them."
Uys said Vodcom was shortlisting preferred bidders when it was hit by the Namemco suit.
"We have two on the list, one of them very interested, and there is a second, but the whole thing is on hold until we resolve the Namemco issue," he said.
Congolese Wireless Network chairman Alieu Conteh said in 2010 that Vodacom Congo was worth $1.5-billion, a figure Vodacom quickly described as "ludicrous".
Vodacom operates in South Africa, the DRC and Tanzania, where it is fighting to defend market share from larger competitors on the continent - MTN and India's Bharti Airtel.
Vodacom said diluted headline earnings a share totalled 706c in the year to the end of March, up from 654.3c.
The company said last month that it expected earnings to be 5% to 10% higher, whereas analysts had predicted a 10% rise. The total dividend jumped by more than 50% to 710c. Analysts had expected 585c.
Data revenue increased 23.6% to R7.6-billion.
Mobile operators across Africa have been rolling out data networks and pushing smartphones in a bid to cut back reliance on voice revenue as their main earnings source.
Mokenela said current price wars on data between operators would soon become unsustainable.
"It might start squeezing their margins. It will not continue for a long time. At some time, they will have to cut their losses," he said.
Capital expenditure rose nearly 37% to R6.1-billion and the tax bill increased 23% to R5.7-billion.
Vodacom shares were up 1.9% at R101.89 yesterday morning .