JOHANNESBURG – South Africa’s government is exploring a sale of its M26 billion stake in mobile-phone company Vodacom Group Ltd. as it seeks funds to rescue state utility Eskom Holdings SOC Ltd., four people with knowledge of the matter said.
The government has approached financial advisers about the possible disposal of its approximately 13.91 percent stake in Vodacom, controlled by Vodafone Group Plc (VOD), said the people, who asked not to be identified as the talks are private. The stake in the wireless carrier with the most subscribers in South Africa will probably be sold to institutional investors rather than to a private buyer, one of the people said, adding that a deal isn’t imminent.
Vodacom (VOD) shares fell as much as 3.4 percent and were 2.1 percent lower at 123.90 rand as of 12:16 p.m. in Johannesburg. A sale of the stake to Newbury, England-based Vodafone, which owns 65 percent of Johannesburg-based Vodacom, is one possibility, one of the people said.
“When government takes such decisions, it would have to handle information with extreme care, bearing in mind that some of the entities are listed and any decision involving them is market sensitive and is governed by strict laws and regulations which must be abided by at all times,” the Treasury said in an e-mailed response to questions. “At appropriate times government has an obligation to publish its decisions and explain their rationale.”
Government spokeswoman Phumla Williams and Siya Qoza, a spokesman for the communications ministry, didn’t immediately respond to e-mails and calls seeking comment.
“We’re not aware of any developments along these lines,” Vodacom spokesman Richard Boorman said by phone.
Vodafone spokesman Ben Padovan declined to comment.
Africa is one of Vodafone’s fastest growing territories as the company takes advantage of comparatively lower mobile-phone penetration rates and economies that are accelerating quicker than more mature European markets.
The continent has also given Vodafone opportunities to sell new products, such as its M-Pesa mobile money service which gives customers without bank accounts a way to store and transfer funds. The company also owns about 40 percent of Nairobi-based Safaricom Ltd., East Africa’s biggest mobile phone company.
South Africa last month said it will increase financial support for Eskom as the state-owned power utility, which supplies about 95 percent of South Africa’s electricity, tries to meet a M225 billion funding gap needed to pay for the construction of power plants to prevent economic growth from stagnating in Africa’s most industrialised economy.
The government last month said it would consider leveraging “non-strategic” assets to help the utility and that Finance Minister Nhlanhla Nene will give details of the support at his mid-term budget presentation on 22 October. Ratings agency Standard & Poor’s said in June it may cut Eskom’s credit rating to junk.
“Government is invested in a number of companies, in some companies it is not strategic for government to be invested,” Nene said in an interview in London yesterday. “We would have to look at some of the state assets that we would actually be able to offload. It is a very sensitive time because we are engaging with companies themselves at the moment.”
Vodacom had 32.5 million subscribers in South Africa at the end of June. The shares are down 6.8 percent this year, compared with a 9.3 percent gain for MTN Group Ltd. (MTN), its closest competitor in the country. The stock has been hurt by a reduction in the amount Vodacom can charge smaller operators to end calls on its network, known as mobile termination rates. – Bloomberg