Vodacom’s R5.6bn African expansion

29 August 2008

South African cellular company Vodacom is spending US$700-million (about R5.6-billion) to acquire Gateway Telecommunications, which is Africa’s largest independent provider of interconnection via satellite and terrestrial infrastructure.

The transaction amount includes an enterprise value of approximately $675-million, as well as a make-whole payment of approximately $25-million in relation to Gateway’s high-yield bond.

“The acquisition of Gateway reflects Vodacom’s strategy to reposition itself as a leading pan-African provider of communications services and to diversify from its current status as primarily a mobile-centric network operator,” Vodacom Group CEO Pieter Uys said in a statement this week.

“We believe that Gateway’s significant presence across Africa will allow Vodacom to tap into the huge potential for growth in business services and connectivity and will enhance our position with multinational corporations.”

Gateway, which also provides an extensive range of high quality, end-to-end connectivity solutions to multinational corporations operating across Africa, employs approximately 350 employees in 17 countries throughout Africa and Europe, and recorded sales of $257-million (about R1.9-billion) for the financial year ended in December 2007.

The Gateway Broadcast Services Group, which is the broadcasting business held by Gateway Telecommunications, does not form part of the transaction and will be retained by the current owners.

According to the statement, the acquisition provided Vodacom with benefits such as accelerated international expansion, as well as broadening the cellular operator’s international presence in key markets throughout Africa, especially Nigeria, and creates a platform for further future expansion and growth potential.

The move also positions Vodacom as a partner of choice for multinational customers and international telecommunications providers seeking African connectivity, and complements Vodacom’s business services strategy in South Africa, allowing the roll-out of existing and new products and services across the continent.

In addition, the deal offered cost savings through revenue synergies as well as on satellite operations, vertical integration and procurement, as well as access to Gateway Telecommunication’s blue chip customer base.

“This is an exciting milestone in Gateway’s development as a unique pan-African service provider,” said Gateway Telecommunications CEO Peter Gbedemah. “We will increase resources, efficiency, and product range and continue our relentless focus on meeting the requirements of all Africa’s mobile networks and multinational corporations.

SAinfo reporter

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