Illustrative image | The Vodacom World Mall in Midrand, Johannesburg. (Photo: Waldo Swiegers / Bloomberg via Getty Images) | Maziv, the parent company of Vumatel and Dark Fibre Africa. (Photo: Maziv) The headline of Vodacom’s audited financial statements is that just under half (R6.282-billion) of the R12.642-billion Vodacom paid for a 30% share of Maziv – the proper collective noun of Vumatel and Dark Fibre Africa (DFA) – was a bet on future profitability. Finance bros call it “goodwill” because it’s a gesture that reflects how much the acquirer values the company above its underlying assets.
As Daily Maverick has previously explained, specifically – and at considerable length – in the video just below this paragraph, Vodacom now increases its stake in the country’s fibre-to-the-home landscape from 2.5% to 34.5% to create an undisputed market leader. And on the DFA side, 35% of the fibre-to-the-tower market.
The rest of the price was made up by Vodacom throwing its own fibre network assets into the pool (valued at R4.569-billion), and the big red network offered R7.928-billion in preferential shares to the big banks (namely Standard Bank, Absa and RMB).
And, again as previously reported, Remgro – which owns CIVH, which is the other major shareholder in Maziv – pocketed R2.661-billion from the pre-close profits.
A balancing act
Now, because this deal was massive and it was very complicated to calculate the exact value of the networks being traded, the auditing firm Ernst & Young (EY) flagged it as a “Key Audit Matter” and used pricing experts to check all the maths and asset values.
When giving their final report on the transaction, the auditors stated that:
“Based on the procedures performed over the significant acquisition of 30% of Maziv (associate), we identified areas of discussions with management and after resolution we were able to conclude on our procedures.”
So according to them, all was good with the way the acquisition was reflected in the results.
Vodacom Group CEO Shameel Joosub was predictably happy about the deal, writing that this (alongside the Safaricom acquisition) helped strengthen the company’s long-term growth profile and accelerated inclusive connectivity to serve the “beyond mobile” positioning.
“Separately, in December, we finalised the acquisition of a strategic stake in Maziv, a South African fibre business, unlocking the opportunity to accelerate fibre deployment and expand access to high quality connectivity, particularly in historically underserved communities.”
But all the grass is not quite that green on the post-2025 side of the acquisition. The deal represents a strategic win that solves Vodacom’s weakness in the fixed-line internet market, but it is too early to call it a financial net win.
Concessionary hurdles
The ultimate success of the deal will depend on whether Vodacom and Maziv can make low-cost, high-volume internet profitable while navigating massive debt and strict government oversight.
First, to get the Competition Commission to approve the deal, Vodacom had to surrender significant corporate power. They cannot increase their shareholding beyond 34.95% without further regulatory consent.
In doing so Vodacom also lost its right to veto Maziv’s expansion budgets, ensuring it cannot slow down the company’s growth to protect its own mobile interests.
Then, being a big part in the dominant fibre to the home player comes at some cost. Mzansi’s affluent urban fibre market is already saturated, so the future success of this investment relies entirely on whether Maziv can turn a profit expanding into lower-income townships and secondary cities.
The merger conditions legally force Maziv to spend R12-billion on infrastructure and pass a million homes in these lower-income areas over the next five years – a tall return on investment order in a notoriously difficult market with lower revenue potential per user and higher security and maintenance costs. Oh, 75% (R9-billion) of that budget must be on new fibre networks.
And it must also provide free, ultra-fast (1Gbps) internet connections to all public schools, libraries, and clinics that are located along their new fibre routes.
The cost of success
That lack of control also came to haunt Joosub and company when Vumatel got the green light to buy the rest of Herotel so that they own it entirely, with the final approval happening in May 2026.
Because this Herotel purchase happened after Vodacom bought into Maziv, Maziv now needs more money to pay for the rest of Herotel. To keep its ownership stake at 30%, Vodacom announced it expects to pay at least another R800-million.
Vodacom also promised to spend R60-billion to ensure 90% of the population has 5G coverage by the end of the decade. And Maziv is banned from raising the prices of its cheapest internet packages for two years, and forbidden from forcing customers to upgrade to more expensive packages until 2030.
The mobile network company’s executive incentives are tied to conditional share plans based on achieving targets for operating free cash flow (60%), Total Shareholder Return (20%), Return on Capital Employed (10%), and Environmental, Social, and Governance goals (10%).
While a R68-million return on the Maziv deal in four months is very much a green shoot of success, there are some turbulent times ahead to test the hand that made the wager. DM