Yebo Yethu investors must zoom into South Africa

As the Yebo Yethu BBBEE scheme draws close to the date of opening up for limited trading on the 3rd of February 2014 existing investors and potential investors in the Vodacom scheme will be well advised to zoom in.

Zoom into the South African segment of the Vodacom operation and not necessarily the widely publicised Vodacom Group figures. That is because Yebo Yethu is invested in Vodacom SA which excludes a number of high growth operations in a number of African countries. This is pertinent to avoid the apparent mass confusion surrounding the Welkom Yizani scheme. Many investors in the Welkom Yizani scheme seem to track Naspers performance, share price and earnings, to judge the scheme. Whereas Welkom Yizani is invested in a South African print bias operation called Media24. This operation is a subsidiary of Naspers. It is not Naspers.

The same applies to the Yebo Yethu BBBEE scheme. The scheme is invested in Vodacom SA which is a subsidiary of Vodacom Group. Tracking Vodacom Group performance, earnings and share price, is useful to a certain extent but it can be misleading given the different dynamics that go into creating value between someone invested at Vodacom Group level and at Vodacom SA via Yebo Yethu.

In reporting financial results for the six months ended September Yebo Yethu scheme administrators partially make this pertinent point. “In reading this announcement, it is important to keep in mind that the key concern of YeboYethu shareholders is that Vodacom SA continues to grow and prosper over the long-term.”

The ability of Vodacom SA to achieve this, despite the short-term challenges which are discussed below, has a lot to do with it being part of Vodacom group of companies, which aims to be a leading provider of total communications in sub-Saharan Africa, and the Vodafone group of companies being the world’s leading international mobile communications group by revenue.”

There are many benefits for Vodacom SA, and therefore for YeboYethu, of this ownership structure. These include the opportunity to save costs through centralised buying and to offer customers greater value through new product and service innovations.”

In our next installation we will then zoom into Vodacom SA performance, the threats, challenges and opportunities thereof. Suffice to say, the South African market has turned tough for all three plus one mobile phone network operators, Vodacom, MTN, Cell C and Telkom Mobile. The market has reached maturity, on the voice front. It’s a dog eat dog world.

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