Vodafone eyes controlling stake in Vodacom

Vodafone plans to increase its share in Vodacom amid a growing race for South African telecom assets

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By  Roger Field Published  June 3, 2008

UK mobile operator Vodafone is planning to take a majority controlling share in South African operator Vodacom and has already offered to buy a further 12.5% stake in the company from Telkom, for 18.75 billion rand ($2.41 billion).

If the deal goes ahead, the UK operator will increase its stake in Vodacom from 50% to 62.5%. Shares of South African operator Telkom surged by more than 8% to a six month high on the back of the news.

Meanwhile, Telkom, a South African fixed-line and wireless operator, announced earlier that it had been approached by a consortium led by Mvelaphanda Group, a South African investment company. In a letter of intent, the consortium said it was considering leading a bid for Telkom, but only if Telkom disposed of its Vodacom stake.

It is widely thought that Vodafone was spurred to make the offer for Vodacom as telecom operators from various continents, including Reliance Communications and Bharti Airtel of India, scout for opportunities in South Africa.

Reliance Communications, India's second biggest mobile operator by subscribers, entered talks with South Africa's MTN regarding a possible merger of the two companies in May. If a deal goes ahead, it could create one of the biggest telecom operators among the sector's emerging markets.

Arun Sarin, Vodafone's outgoing chief executive, said recently that he was confident Vodafone would do further deals in Africa, and rebuffed criticism over the company's decision not to bid for MTN.

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