Vodacom COO talks strategy

TMT Finance's EMEA Editor Joseph d'Arrast talks to Diego Gutierrez, Chief Operating Officer International Markets, Vodacom Group

Aside from South Africa, Vodacom has mobile network operations in Lesotho, Tanzania, the DRC, Mozambique and Kenya. How do you see these operations developing and what key factors do you expect to drive growth in these markets?

Each country is particular with its own challenges but if I can identify some common denominators: we see that in all of these countries we are facing a decline or at least a flatline in voice revenues. That means we need to tap into new revenue streams in order to be able to drive growth. And for this we are looking at building new, successful ventures.

The M-Pesa business continues to enjoy significant growth for instance and the opportunities are endless. I think we are just scratching the surface on M-Pesa.

Obviously monetising data and the growth of digital content solutions is another key factor driving overall growth. Another area where we expect to see growth is the enterprise business which offers many opportunities.

Major regional players are looking at diversifying their revenues to compensate for lower income from voice and data. M&A is one way to do it. Do you have an opportunistic approach to M&A or is Vodacom targeting specific markets? Are countries such as Angola or Ethiopia markets you’re looking at?

Like most continent players, we are always evaluating investment opportunities. This doesn’t necessarily mean there is a specific M&A strategy where we must acquire something or where we must expand. We have more of an opportunistic approach. It’s on a case-by-case basis.

There are many things we look at. We have to evaluate the local environment, the regulatory framework, the number of players, the market share, etc.

However, these are competitive markets and its clear many of them are ‘yelling’ consolidation, and we believe it needs to happen.

Vodacom acquired a 35% stake in Safaricom in August 2017 from your parent company Vodafone. What was the strategy behind this move?

Safaricom is one of these great investment opportunities that I was talking about; it is the market leader in Kenya and it enjoys a very strong brand. And, for Vodacom, it is a unique chance to gain access to the M-Pesa business.

M-Pesa is spearheading growth across our operations; and I strongly believe that the learning, the synergies and the scalability that we can get from combining the business in Kenya opens doors to many opportunities.

Frankly speaking, what Safaricom has done in Kenya is world class. Also, expanding our enterprise business through this acquisition was key.

Another way to diversify your revenues is to invest in different verticals such as financial services and media. What role is M-Pesa playing in your regional strategy and are you looking to replicate Safaricom’s aggressive digital strategy in other markets?

Every country has a specific level of sophistication when it comes to M-Pesa. For example, countries like Kenya and Tanzania are very sophisticated, while others are in the process of achieving this level of sophistication.  Using M-Pesa in Kenya as a benchmark and a centre of excellence is a great way of doing this.

When it comes to media and content, it’s about what each country needs. Right now, one of the great debates is about local content, and hard-fought debates revolve around: How much local content is needed? Is the answer to accelerate growth of media, music, and gaming? It’s about localising.

Investment in broadband is key and a lot of pure players are currently investing massively in Africa, whether they are towercos or fibre operators. What is Vodacom's regional strategy for infrastructure investment?

It’s key to find very efficient ways to roll out our infrastructure. The returns have to be very well calculated and I am big supporter of all types of partnerships. I’m talking about co-building, passive sharing, active sharing, spectrum sharing. For instance, in Tanzania we are building fibre with two other operators, we’ve built an important backbone and we continue to do so. Each operator can use the network for the purpose they want: for transmission or their enterprise business.

 

That allows us to expand our business, expand mobile services in areas where doing it alone would be difficult. I think that’s the right way to do it. The same goes for datacentres: you don’t necessarily have to build your own datacentre, there are companies that can build it for you or you can co-build with someone else. If we want to be more efficient and we continue to drive penetration in these markets, it’s important that we are more pro-active about how much we share.

What about telecommunication towers? Are you looking at divesting some of them?

We have done it in Tanzania where we sold 1,000 towers to Helios Towers Africa. But it’s not something we’re necessarily going to do again. There needs to be a business case for us but also to the tower company. It’s not an overall outsourcing strategy for us, we have more of an opportunistic approach, depending on how the country is structured.

 

Register for Free trial

TMT M&A Awards 2019

TMT Finance World 2019

Women in TMT 2019

Europe's Top 20 TMT Dealmakers 2019

USA's Top 30 Comms M&A Dealmakers

Asia's Top 50 TMT Dealmakers