Vodafone on a selling spree – and Vodacom looks attractive

Vodafone has sold numerous operations over the last four years, and Vodacom is an attractive acquisition target for many global players.

On 15 March 2024, Vodafone announced that it had agreed to sell 100% of its Italian operations – Vodafone Italy – to Swisscom for €8 billion.

The sale of Vodafone Italy followed five months after Vodafone signed a deal to sell its Spanish business to UK-based investment firm Zegona Communications for €5 billion.

These two transactions will deliver €12 billion in cash, which Vodafone will use to return €4 billion to shareholders via buybacks as part of its broader capital allocation review.

Vodafone CEO Margherita Della Valle explained that these deals formed part of their “portfolio right-sizing” announced in May 2023.

“With the sale of Vodafone Italy and Vodafone Spain, Vodafone will now focus its operations in Europe on growing markets, where we hold strong positions with good local scale,” she said.

Vodafone will also focus on business-to-business services, which Della Valle described as their biggest growth opportunity.

“Demand for digital services is strong, and we are particularly well positioned to support SMEs and public sector customers,” she said.

The sale of Vodafone Italy and Vodafone Spain formed part of a selling spree that started in 2019.

In 2019, Vodafone sold its stake in Vodafone Malta to Monaco Telecom. In the same year, Vodafone created Vantage Towers, which houses its European mobile towers.

In 2022, Vodafone sold a stake in Frankfurt-listed Vantage Towers to a private equity consortium in a deal valuing the business at $17.3 billion.

In 2023, Vodafone sold its stake in Vodafone Ghana to Telecel Group. It also sold Vodafone Hungary to the Hungarian state.

Vodafone CEO Margherita Della Valle

The selling spree raised questions about whether Vodafone was also looking to offload Vodacom, which housed its most valuable African operations.

Industry players speculated that Vodafone was packaging Vodacom as a leading African mobile communication company in preparation for acquisition.

After Vodafone acquired a majority stake in Vodacom and listed the company on the JSE in 2009, it made a big strategic change.

Vodafone started to use Vodacom as its exclusive investment vehicle in sub-Saharan Africa from the effective date of the listing.

In 2017, Vodacom acquired 87.5% of Vodafone Kenya from Vodafone International, which translated into a 34.94% indirect stake in Safaricom.

In 2020, Vodafone handed over management of its Ghana unit to Vodacom in another step to bundle its African operations under one roof.

At the end of 2022, Vodacom purchased a 55% stake in Vodafone Egypt in a deal valued at R48.1 billion.

Vodacom is also part of a global consortium behind Safaricom Ethiopia, which recently launched its mobile network in the country.

Vodafone has, therefore, moved all its African operations to Vodacom, which is now primed for acquisition.

The main reason is that it is easier for Vodafone to offload its African operations as a single entity — Vodacom — than to sell them individually.

There was immediate interest in the “new Vodacom”. In December 2022, Emirates Telecommunications Group (Etisalat) explored a potential investment in Vodacom.

Etisalat is headquartered in Abu Dhabi, United Arab Emirates, with operations in 16 countries across Asia, the Middle East, and Africa.

Etisalat wanted to increase its international footprint and was assessing the feasibility of buying all or only a part of Vodafone’s majority stake in Vodacom.

In February 2023, Bloomberg reported that Vodafone was exploring options for its African business as investors ramped up pressure on the company to boost performance.

Vodafone reportedly worked with advisers to study ways to extract more value from its 65% holding in Vodacom.

The considerations ranged from merging the business with other operators or divesting some assets in certain markets. It also included selling a stake in Vodacom.

Although not much has happened since last year, industry rumours suggest that Vodafone continues considering its options with Vodacom.

Despite the reports that Vodafone was exploring options and Etisalat’s interest, the company maintained that Vodacom was not for sale.

Last year, Vodacom CEO Shameel Joosub also said the messaging from its main shareholder, Vodafone, was clear – Vodacom is not for sale.

Joosub said Vodafone remains committed to Vodacom and does not want to sell the company.