VZCZCXRO0887
RR RUEHDU RUEHJO RUEHMR
DE RUEHSA #4936 3541006
ZNR UUUUU ZZH
R 201006Z DEC 05
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 0562
INFO RUCPDC/DEPT OF COMMERCE WASHDC
RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHEG/AMEMBASSY CAIRO 0262

UNCLAS PRETORIA 004936 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECPS EINV ECON SF
SUBJECT: SOUTH AFRICA: VODAFONE IN SECOND LARGEST SOUTH 
AFRICAN FOREIGN INVESTMENT 
 
REF PRETORIA 1959 
 
¶1. (U) Summary. British-based cellular group Vodafone 
announced plans to takeover investment firm Venfin in 
order to boost Vodafone's stake in South African cell 
phone provider Vodacom.  The move makes Vodafone a 50% 
owner of Vodacom, and allows Vodacom to pursue African, 
Middle Eastern, and European markets that were 
previously off limits because of shareholder agreements. 
Provided that there are no regulatory snags, Vodafone's 
investment will be the second largest foreign investment 
in post-apartheid South Africa.  End Summary. 
 
¶2. (U) British-based cellular group Vodafone announced 
plans to spend R15.6 billion ($2.4 billion) to gain 
controlling interest over investment firm Venfin, which 
owns 15% of South African cell phone operator Vodacom. 
The deal will boost Vodafone's stake in Vodacom from 35% 
to 50%.  The other 50% of Vodacom is owned by South 
Africa's monopoly fixed line operator Telkom.  This will 
allow Vodacom to proceed with expansion plans in Africa, 
Europe, and the Middle East. 
 
¶3. (U) Vodafone's move was complex and expensive.  Once 
Vodafone takes over Venfin, it will shed all of Venfin's 
holdings except for Vodacom.  The acquisition will allow 
Vodacom to pursue market opportunities previously off 
limits as the result of complicated shareholder 
agreements preventing it from entering any country north 
of the equator, such as Egypt where the government 
expects to offer a third cellular license by the end of 
the year.  The deal with Vodafone eliminates these 
restrictions. 
 
¶4. (U) Vodafone's purchase of 4.6 million VenFin shares 
at prices between R44.75 and R46.60 rewarded VenFin 
shareholders with a 41% premium over the 30-day average 
selling price.  This makes Vodafone's investment the 
second largest foreign direct investment since 1994. 
How Vodafone will meet the government's black economic 
empowerment goal of 25% equity in black hands remains 
unclear. 
 
¶5. (U) Vodafone's announcement came after another 
British group, Barclays Bank, bought a majority stake in 
South Africa's largest retail bank, ABSA, for R33 
billion ($5.5 billion) in May this year.  Financial 
analysts said these investments point to increasing 
confidence in the South African economy, now on track to 
grow at 4.4% this year, the highest rate since 1988 
(Reftel). 
 
TEITELBAUM