SA unions threaten £1.7bn Vodafone deal

A £1.7bn deal between Vodafone and the South African telecoms incumbent Telkom is at risk of collapse following last-minute legal action from the country's communications regulator and trade unions.

A £1.7bn deal between Vodafone and the South African telecoms incumbent Telkom is at risk of collapse following last-minute legal action from the country's communications regulator and trade unions.

Vodafone and the state-controlled Telkom, who are 50:50 partners in the cellular network Vodacom, announced a deal last year whereby Vodafone would buy 15 percent of Vodacom from Telkom for R22.5bn, giving it a controlling interest. Vodacom would then be listed – an event that is due to take place on Monday.

The arrangement would allow Vodafone to pursue a more aggressive strategy in Africa but, on Friday, the Independent Communications Authority of SA (Icasa) did a U-turn on its approval of the deal. The decision followed an interdict from the trade unions, who fear mass job losses if Telkom loses its biggest money-spinner (Vodacom provides 77 percent of Telkom's operating profit, they point out).

Icasa and the Congress of SA Trade Unions (Cosatu) faced Vodacom in court on Sunday, in an emergency bid to delay the listing. The outcome of the hearing is not known at the time of writing.

The regulator said it wanted to delay the listing so as to allow the trade unions' legal action, which was launched in early May, to be heard in court without the Vodafone-Telkom arrangement being a fait accompli. In doing so, Icasa reversed its position from April, when it said the transaction did not require its prior approval.

Icasa said it intended to hold public hearings in mid-June "to allow all interested parties to be heard".

The decision came as an enormous surprise to Friday's markets, knocking the rand down 3 percent. Critics have attacked the regulator for giving foreign investors the impression of an unpredictable business environment, and for delaying the break-up of a partnership that holds a "dominant position" in the SA telecoms market, where prices remain high by international standards.

Jacob Zuma's government is seen to be less than keen on the listing of what it views as a key national asset. The new president also counts the trade unions as key supporters, and some are suggesting political interference in the regulator's decision.