Vodacom says will fight on to keep Congo unit
South Africa's Vodacom said it will fight a court ruling that it must pay $21 million in consultancy fees or submit to the mandatory sale of its shares in its joint venture in the Democratic Republic of Congo.
The South African unit of Britain's Vodafone also on Monday posted a modest 8 percent rise in full-year earnings, coming just short of expectations after a hefty tax bill and high capital expenditure costs.
Chief Executive Pieter Uys said Vodacom was appealing the recent Congolese court ruling, which said Vodacom must pay a local firm, Namemco Energy, $21 million in consultancy fees or face the sale of some of its stake in its local business on June 3.
"The bottom line is that we will not let that asset go, we will not get to a situation on the 3rd of June where the asset is just sold," he said on a conference call with reporters.
Vodacom had already been locked in a long-standing battle with its local partner in the Congo, Congolese Wireless Network, over fees. It had been looking at options to exit the business, but that process has been halted by the suit from Namemco.
"This is looking like a bit of a messy situation for Vodacom," said Lehlohonolo Mokenela, a research analyst at Frost & Sullivan.
"One would hope that it would be resolved by now. It would be wise to find a resolution quite quickly, it's seeming to have quite an unsavoury effect on them."
Uys said on Monday that it had gotten to the stage of short-listing preferred bidders before it was hit by the Namemco suit.
"We have two on the list, one of them very interested and there is a second one, but the whole thing is just on hold until we resolve the whole Namemco issue," he said.
The value of the unit is also disputed. Congolese Wireless Network chairman Alieu Conteh told Reuters in 2010 that Vodacom Congo was worth more than $1.5 billion, a figure Vodacom quickly described as "ludicrous".
Vodacom operates in South Africa, the Democratic Republic of Congo and Tanzania, where it is fighting to defend market share from larger competitors on the continent MTN Group and India's Bharti Airtel.
Vodacom said diluted headline earnings per share totalled 706 cents in the year to end-March, up from 654.3 cents a year earlier.
The company said in a trading statement last month it expected earnings to be 5-10 percent higher, while a poll of 17 analysts by Thomson Reuters predicted a 10 percent rise.
Headline EPS, the main measure of profit in South Africa, exclude certain one-time items.
The total dividend, however, jumped over 50 percent to 710 cents. Analysts had expected 585 cents, according to the Reuters poll.
Data revenue increased 23.6 percent to 7.6 billion rand ($912.8 million).
Mobile operators across Africa have been rolling out data networks and pushing smartphones aiming to cut back reliance on voice revenue as their main earnings source.
Frost & Sullivan's Mokenela said current price wars on data between operators would soon become unsustainable.
"It might just eventually start putting a squeeze on their margins. It will not continue for a very, very long time. At some time, they will have to cut their losses," he said.
Capital expenditure rose nearly 37 percent to 6.1 billion rand, while the tax bill increased 23 percent to 5.7 billion rand.
Shares of Vodacom are up 1.9 percent at 101.89 rand and more than 14 percent this year as at 0807 GMT. Johannesburg's Top-40 index of blue chips is down 0.1 percent.
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