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Vodacom Congo’s fate unclear as it heads for arbitration

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Pieter Uys, CEO Vodacom

Vodacom Congo faces an uncertain future as its shareholders head for an arbitration process in Brussels, meaning limited capital flowing into the company’s operations in Congo.

“At least now management knows that there is a process under way that will lead to a conclusion. Operational expenses will be met from cash flow with limited new capital to keep the business ticking, but not at the same level as before”, said Bob Collymore, Vodacom Group’s chief officer for corporate affairs, quoted by South African BusinessDay publication.

Collymore hoped that the process would take “less than a year to be finalized”, but according to experts, international arbitration processes can be lengthy and it is highly unlikely to be a short wait.

Vodacom Congo’s travails might hinder Vodacom Group’s plans to expand in Africa, already dominated by its rival MTN. The Group has announced its continuous commitment to the continent, having recently acquired Gateway Communications, which provides telecommunications services such as satellite connectivity.

Since the group failed to reach agreements on capital restructuring with Vodacom Congo and Congolese Wireless Network, speculations have been rife about a probable exit from Congo, following the souring relationship with its partners.

Vodacom Group owns 51% of Vodacom Congo and Congolese Wireless Network.

The company’s expansion in Africa also faces new, aggressive competition from Bharti Airtel, who entered the fray via its acquisition of Zain, as well as the prospect of new licenses being issued around the continent.

“The door for new licenses is quickly closing and competition from international companies to buy African assets is intensifying”, said a telecoms analyst at Frost&Sullivan, adding that Vodacom must remain in Congo, a country with cellphone penetration under 20%, to sustain its plans of expansion across Africa and possibly look into the fixed-line business.

Acquiring new licenses in Ethiopia, Angola and beyond would be a challenge for Vodacom, since there are no indications of open biddings, concluded a telecoms analyst at Africa Analysis.

Apart from Congo, the carrier has operations in South Africa, Tanzania, Mozambique and Lesotho.

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