sourceVODACOM Group has put its problems with its minority partner in the Democratic Republic of Congo behind it, which will allow the cellphone operator to scale up investments to double the number of subscribers in its largest untapped market, within five years.
The International Chamber of Commerce "has ruled in our favour in the arbitration on Vodacom Congo", said Vodacom CEO Shameel Joosub on Monday, talking about the long-running shareholder dispute in the 51%-held company that is Congo’s largest operator.
Vodacom is involved in a funding dispute with its 49%-partner, Congolese Wireless Network (CWN), over loans it provided to the Congolese business for capital investments. "The case is over. The arbitration found in our favour on the funding issue. It said we have the biggest share in the business," a guarded Mr Joosub said.
"But we’re now going through a process to find a final settlement in the (Congo)."
Vodacom has been embroiled in a dispute since 2010 with CWN following its investment of $484m to expand and improve the infrastructure of Vodacom Congo. At the time, CWN could not fund its portion of the capital and said the Vodacom investment would dilute its stake.
CWN later disputed Vodacom’s claim to the debt, and accused it of illegally repatriating funds. After a series of court cases, the partners agreed to submit to international arbitration, in which Vodacom on Monday declared victory.
Mr Joosub would not be drawn on how much is at stake, as the talks are still going on. Neither would he comment on how the company would get its money back.
In the event a final settlement can be reached, Vodacom may choose to increase its stake in the business or accept payment from CWN. CWN could not be reached for comment on Monday.
What Mr Joosub was happy to announce, however, was that Vodacom would now "significantly" increase its annual R1bn capital expenditure in Congo, where it has the largest market share of 36% with its 10-million customers in the 12 months ended March.
The arbitration decision frees the company to grow the business. A year ago it had 7.7-million cellphone users. "We will double the business over the next five years," Mr Joosub said. With an estimated 80-million people and 35% cellphone penetration rate, Congo holds the company’s biggest growth potential.
Even with that potential, the politically volatile country will not claim the company’s biggest share of capital expenditure, as Vodacom will still spend the most capital in its home market, where it is facing a price war from smaller rivals.
Vodacom would spend about R9bn in each of the next five years to grow its fixed-line business, which includes newly acquired Neotel, to connect homes and businesses to its fibreoptic network, Mr Joosub said. "What I see in five years is a much deeper penetration of fixed line in the home and in the business."
As part of its growth strategy, Vodacom told shareholders, it had agreed to buy South African fixed-line company Neotel for about R7bn. The transaction is still subject to regulatory approvals.
Group chief financial officer Ivan Dittrich said the deal would give Vodacom access to "valuable spectrum", which was the key to its "data growth strategies".
If it went through, it would help Vodacom achieve "deeper penetration of the fixed-line business" by expanding access to its fibreoptic networks, which would allow it to offer fixed-line services to homes and businesses.
"We’re starting by connecting over 200 buildings to the fixed line, and we’ll then accelerate that," Mr Joosub said.
"We’re getting the fibre closer to the business and to the home."
Vodacom’s own fixed-line business has more than 7,000km of fibreoptic network, mainly in the large cities, while Neotel brings an additional 15,000km.
That will wean Vodacom off its reliance on Telkom’s fixed-line network, which caters for about 24% of its needs now.
It will also enable Vodacom to take the fight for fixed-line customers to its former parent.
Mr Joosub said: "Putting the two (Vodacom and Neotel) together, you will have a more comprehensive network which enables a lot of things." These would include bundle packages whereby consumers could purchase mobile and fixed-line services on a single account.
Mr Joosub said South Africa’s fixed-line market was "too small by global standards, so we’re moving to increase that". He expected Neotel to be a "much better business" in Vodacom’s hands.