Vodafone eyes South Africa's Vodacom

Vodafone is set to take a controlling interest in Vodacom, the South African mobile phone operator, if the latest round of talks with Telkom, its co-owner, prove successful.

The plan on the table is for the UK-listed group to add 12.5 per cent to its 50 per cent holding in Vodacom, which has 34 million subscribers across South Africa. Vodafone first approached Telkom, which owns the other 50 per cent, last year. But a potential deal was scuppered as it was contingent on Telkom's discussions with MTN about its fixed assets, which were fruitless.

Africa is proving increasingly attractive to global telcos looking for growth opportunities outside saturated domestic markets. The biggest possible deal at the moment is the £20bn sale of MTN, the South African comp-any with networks across the continent. India's Bharti Airtel was originally in the frame, but when the approaches came to nothing, Reliance, another Indian group, threw its hat into the ring.

'People are realising that Africa is the last great untapped economy frontier,' said Mike Grant, a partner at Analysys Mason. 'South Africa is the largest and strongest market on the continent, and is very competitive, particularly in the mobile arena, but it is also growing very quickly and a number of providers see that as a useful platform to establish a presence on the continent.'

The key thing, both for the Vodacom deal and the MTN/Reliance discussions, is likely to be the price as growing interest in the region, from both established global players and rapidly expanding Middle Eastern groups with very deep pockets, takes its toll. 'A number of the international players all have the same idea of pursuing growth in emerging markets, and it is inevitable when there are well-financed organisations chasing growth opportunities, that prices start to rise,' said Mr Grant.

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