Vodacom Tanzania snaps up rival Smile as Saudi investors cut losses
April 11th 2024
Vodacom Tanzania has completed the acquisition of small rival Smile Communication in a move that will add to the operator’s network footprint and spectrum holdings to support its 4G and 5G rollout plans.
The deal was implemented on 3 April 2024 with Vodacom Tanzania paying a total of TZS 68.8bn (£22m/€25m, based on 27 November 2023 exchange rates, per the offer agreement terms), on a debt-free, cash-free basis, according to an operator announcement.
Announced in July 2023, the transaction was expected to close in the last quarter of 2023, dependent on approvals from the country’s competition, telecoms, and securities authorities, as well as the companies’ shareholders. Those approvals have been granted, but it is not clear what caused the delay.
Smile had just 13,840 mobile subscribers at the end of June 2023, according to the Tanzania Communications Regulatory Authority (TCRA), making it one of the country’s smallest operators and trailing behind the market’s five main operators Airtel, Halotel, Tigo, TTCL, and Vodacom.
The acquisition will barely move the needle on Vodacom’s 30% market share, which is Tanzania’s largest operator with 19.1m customers at the end of December 2023. However, Vodacom will gain Smile’s 4G network footprint as well as low-band and mid-band spectrum. It appears to have picked up a bargain in the process.
Vodacom benefits as Saudi investors cut losses
While it is not immediately clear how much Smile paid to secure its licences, the Group behind the Tanzanian operation had raised hundreds of million of dollars intended to support the development of its network in Tanzania among other countries.
However, it was on the verge of insolvency in 2022 when interests of Al Nahla Group, a Saudi-based investment fund that was one of Smile’s main creditors, agreed a $235m deal to acquire the business free of all historic debt to avert the operator’s complete collapse. In June 2022 it was reported that Al Nahla had committed $120m to support the continued national 4G rollout in Tanzania, although it is not clear if this was additional funding to the commitments made in the rescue deal. Nevertheless, the sums involved in building up the network dwarf the sum Vodacom paid for it.
Moving in on more spectrum
According to Vodacom’s announcement, the acquisition gives Vodacom access to “sub-1GHz bands” and “mid bands” for mobile coverage and capacity “to better roll out a competitive 4G network service in Tanzania and ensure a best-in-class customer service”.
In Tanzania, Smile is understood to have licences in 800MHz and 2.6GHz frequency bands. The acquisition regulatory filing says it “operates 4G LTE mobile broadband networks in the 800MHz band”.
A Vodacom spokesperson declined to provide additional details on the terms of the deal or the exact spectrum portfolio the Tanzanian OpCo has picked up.
The spectrum from Smile will add to the frequencies that Vodacom Tanzania acquired in the country’s auction in October 2022. Vodacom was the biggest spender, splashing $63.2m to secure access to frequencies in 700MHz, 2.3GHz, and 2.6GHz. The auction netted a total of $187.5m from four bidders: Airtel, Halotel, Tigo, and Vodacom.
In an auction in 2018, Vodacom spent $10m for rights to 20MHz in the 700MHz band.
The operator’s spectrum holdings also include 900MHz, 1800MHz, 2100MHz, and 3500MHz. Most of the spectrum is used for mobile services, but the operator has prioritised 2300MHz and 3500MHz for fixed 4G and 5G services, according to Vodacom Tanzania’s Annual Integrated Report for the year ending 31 March 2023.
Source: Telco Titans
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