Vodafone South Africa Said to Win $350 Million State Deal

  • Vodacom awarded four-year deal as Treasury looks to cut budget
  • Deal would give company higher-spending post-pay subscribers

Vodacom Group Ltd., Africa’s largest mobile-phone company by market value, has won an estimated 5 billion-rand ($350 million) contract with the South African government as the National Treasury seeks to cut costs, according to three people familiar with the matter.

The tender is to supply as many as 1.3 million government employees for four years starting Sept. 15, said the people, who asked not to be identified as details of the deal haven’t yet been made public. If 400,000 government employees take up the service, the contract will be worth as much as 5 billion rand over the duration of the deal, one of the people said.

“Vodacom is honored by the National Treasury’s decision to appoint us as a partner to government to deliver on the all-important task of enabling government to connect and communicate efficiently,” Chief Executive Officer Shameel Joosub said in e-mailed comments on Wednesday, without providing detail of the contract. “Our substantial investment in infrastructure and innovative capability will now be at the disposal of the state.”

The decision is intended to save the National Treasury money and have a reliable telecommunications supplier, according to one of the people. Finance Minister Pravin Gordhan said in his budget speech in February that the reduction of government costs is a priority. The state could save 25 billion rand a year through “belt tightening,” he said, including 500 million rand from changing mobile-phone policies.

Shares Rise

For Vodacom, the deal will help increase its number of customers who pay for voice and data on a monthly basis, rather than on so-called pay-as-you go deals. The Johannesburg-based company had 35.1 million South Africa subscribers at the end of June, of which 30.1 million were lower spending, pre-paying customers.

Vodacom is 65 percent owned by Newbury, England-based Vodafone Group Plc. The shares gained for a third consecutive day in Johannesburg on Thursday, rising 1 percent to 157.42 rand by 12:16 p.m. local time, on track for the highest close since Aug. 16. That values the wireless carrier at 234 billion rand.

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