Vodacom buys Gateway for $700 million
30 Aug 2008
South Africa's largest mobile operator Vodacom Group Ltd has acquired the carrier services and network solutions business of Gateway, an African network and satellite services company with operations in 17 countries.
Under the terms of the deal, Vodafone will pay $700 million that includees Gateway's high-yield $25-million bond obligation and also pay-off of Gateway's debt of $100 million.
The company will retain the Gateway brand name after the acquisition, which includes Gateway's core carrier and business network units that provide satellite, business and interconnect services to African and multinational companies including Chevron Corp., Royal Dutch Shell Plc and Nigeria's Ecobank Transnational Inc. in 40 countries.
Gateway's broadcasting division is excluded from the acquisition.
Vodacom, a 50:50 joint venture between Telkom SA Ltd and the British firm Vodafone Group Plc, said that the deal would make Vodacom the largest buyer of satellite capacity in Africa, allowing it to gain a strong foothold in the telecom communication services in Africa. Currently Vodacom operates as a GSM mobile phone operator.
Britain's Vodafone, which owns 50 per cent stake is backing the acquisition, which will broaden Vodacom's business from its traditional GSM mobile-phone business. However, Vodafone's plan to gain complete control of Vodacom by buying part of Telkom's stake has not materialised as a Nigerian telecom company has also shown interest in buying Telkom's 50 per cent stake in Vodacom.
Though Vodacom plans to raise capital from South African and European lenders, investment will not come easy as network and connectivity businesses did not offer the same returns as voice and could dilute margins, according to telecom analysts. The company expects to close the deal by the end of the year.
Gateway Telecommunications SA provides mobile and fixed-line services for data and voice traffic, mainly by satellite to African phone companies and global multinational companies including Chevron Corp, Royal Dutch Shell Plc and Nigeria's Ecobank Transnational Inc.
