Vodacom had the opportunity to buy Vumatel for approximately R5 billion but passed on it. It later paid R13 billion for a 30% stake in Vumatel and DFA.
This was revealed by an executive with knowledge of the 2018 negotiations between Vodacom and Vumatel.
At the time, Vodacom had a strong focus on diversification, which included growing its presence in the South African fibre-to-the-home market.
Vumatel, the country’s largest fibre-to-the-home player, was the obvious target. Many shareholders, including founder Niel Schoeman, were ready to cash in.
Vodacom entered into discussions with Vumatel around the same time as Remgro’s Community Investment Ventures Holdings (CIVH).
Former Vodacom CEO Pieter Uys, now a Remgro executive, led discussions with Vumatel on behalf of CIVH.
In June 2018, Remgro announced that Community Investment Ventures Holdings had acquired a 34.9% stake in Vumatel for an undisclosed amount.
It has also entered into an agreement with Vumatel shareholders to acquire the remaining 65.1% of the fibre operator, subject to funding and regulatory approvals.
Remgro, under the guidance of Uys, saw value in Vumatel and its fibre infrastructure and was willing to pay the required price to close the deal.
Although Remgro never disclosed how much it paid for Vumatel, market speculation suggests it was in the region of R5 billion.
Under Uys’ guidance as CIVH chairman, Vumatel invested billions into its fibre rollout and became the dominant force in South Africa’s fibre market.
Combined with DFA, the largest player in the country’s wholesale open-access fibre market, he created a next-generation telecommunications giant.
That means Remgro struck a deal, and Vodacom missed out on the opportunity to acquire the company, which was already on track to become the largest fibre-to-the-home player in South Africa.
When MyBroadband asked Vodacom CEO Shameel Joosub about their discussions with Vumatel in 2018, he declined to comment.
Joosub said that while he could not comment on speculation about acquisitions, Vodacom was exploring ways to expand its fibre network.
There was also speculation about a potential deal between Vodacom and CIVH to join forces in the acquisition, but the companies would not comment on this rumour.
Remgro executive and CIVH chairman Pieter Uys
Under its new, deep-pocketed owners, Vumatel accelerated its fibre rollout across South Africa and began to dominate the market.
It was not long before Vodacom came knocking. In 2021, Vodacom announced its intention to acquire a strategic stake in CIVH’s fibre assets, including Vumatel and DFA.
Everything played out as Uys planned. Their multi-billion-rand Vumatel acquisition and big fibre rollout investment made CIVH too big to ignore.
After losing out on buying Vumatel for approximately R5 billion, Vodacom had to pay a much higher price for a smaller stake in the new fibre entity.
The company’s latest annual report revealed that it had paid R7.93 billion in cash for its 30% stake in Maziv, which housed Vumatel and DFA.
Vodacom also contributed fibre assets and contractual rights valued at R4.57 billion, with a further R143 million in capitalised transaction costs.
Against this R12.64 billion total, Vodacom’s share of Maziv’s net identifiable assets was worth R6.36 billion. That meant R6.28 billion of the price Vodacom paid for its 30% stake in Maziv was goodwill.
Simply put, Vodacom paid more in goodwill for its 30% stake than it would have paid to buy Vumatel outright a few years earlier.
The reality is that Pieter Uys outsmarted Vodacom, and his strategy around Vumatel created great value to Remgro shareholders.
Vodacom paid roughly double for a 30% stake in Maziv than Uys and the CIVH team paid for the entire Vumatel.
Apart from being one of the largest deals in the South African telecommunications market, it was also an example of Remgro’s perfectly executed strategy.
Uys knew he could pay a high price for the Vumatel assets, since Vodacom would inevitably pay an even higher price for them down the line.
He structured one of the best deals in South Africa’s telecommunications market and ensured that Vodacom footed the bill.
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