MTN considers Vodacom Congo acquisition

18 Oct 2011

South Africa’s MTN Group is believed to be interested in entering the Democratic Republic of Congo’s (DRC) wireless market by purchasing Vodacom Group’s 51% stake in Vodacom Congo, reports Bloomberg, citing two people close to the matter. Vodacom Congo is considering selling its stake to end a dispute with its local partner, Congolese Wireless Networks (CWN) that has halted the cellco’s progress since 2009. The dispute, according to TeleGeography’s GlobalComms Database, began in 2009 when CWN accused the South African-based group of fraud and abuse of trust. CWN alleged that Vodacom Group charged excessive levels of interest on loans to Vodacom Congo for network expansion. The disagreement between the two was exacerbated when Vodacom proposed a capital injection of USD484 million, which would have diluted CWN’s shares in Vodacom Congo. CWN refused the injection point blank and instead proposed a liquidation or sell-off to a third party, which Vodacom in turn rejected. In order to resolve the dispute, in March 2010 the two agreed to refer the matter to the International Chamber of Commerce in Brussels for arbitration.

If successful in its acquisition, MTN would follow France Telecom (FT) as the second large group, with experience in developing African markets, to seek entrance into the DRC mobile market this year. Earlier this month FT confirmed that it had agreed to purchase the Congolese government’s 49% stake in Congo Chine Telecom and is currently involved in talks to arrange the purchase of the remaining 51% from Chinese vendor ZTE. MTN and FT would compete with local subsidiaries of Luxembourg’s Tigo and Indian-backed Bharti Airtel in a market with less than 20% population penetration, one of the lowest in the region.

Congo, Dem. Rep., MTN Group, Vodacom Congo (DRC), Vodacom Group