South African government sells 13.9% stake in Vodacom to fund Eskom; Vodacom, Neotel deal approved

1 Jul 2015

The South African government has sold its 13.91% stake in Johannesburg-based Vodacom Group to the Public Investment Corporation (PIC), in order to help fund a ZAR23 billion (USD1.89 billion) allocation to struggling domestic electricity supplier Eskom, the National Treasury said in a statement. ‘In arriving at a decision to dispose of its stake in Vodacom to the PIC, the government undertook a market sounding exercise where numerous organisations presented proposals for raising the funding to be allocated to Eskom’. The PIC’s offer to government was in line with pricing quoted by other institutions when taking into account the large size of the stake and also provided the added benefit of keeping the shares within the broader family of public sector-related institutions, the Treasury said. According to the statement, the National Treasury and the Department of Telecommunications and Postal Services (DTPS) worked together in executing the transaction.

According to TeleGeography’s GlobalComms Database, Vodacom Group is owned by UK-based mobile giant Vodafone Group (65.00%) and the South African government (13.91%); the remainder of 21.09% is distributed. Shares are listed on the Johannesburg Stock Exchange (JSE).

Meanwhile, in related news the Competition Commission (CompCom) has given its conditional approval to Vodacom’s ZAR7 billion acquisition of domestic operator Neotel. In order to address the concern that the proposed merger is likely to lessen competition in the telecoms market, the CompCom and the merging parties agreed on the several conditions, including: Vodacom must not use Neotel’s spectrum for wholesale/retail mobile services for two years from the approval date or 31 December 2017 (whichever is earlier); Vodacom must commit to ZAR10 billion investment in fixed network, data and connectivity infrastructure, with 50% of the committed investment amount to specifically comprise investments in all fixed network elements required to enhance services to homes and enterprises in South Africa; and Vodacom must (within a period of 24 months following the approval date) ensure that the value of shares held by Black Economic Empowerment (BEE) shareholders increase by ZAR1.4 billion (the value of BEE’s current stake in Neotel).

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