Vodacom Tanzania PLC has acquired broadband internet provider, Smile Communications, after purchasing all its shares to a tune of US$ 27.4 million.
- The Tanzanian Telco agreed to buy each of Smile’s shares at a rate of Tsh. 0.24, in a transaction earmarked as ‘debt-free’ and ‘cash-free’.
- Smile’s customer base, which is about 15,000, will be a drop in the ocean for Vodacom but the acquisition deal allows the company to utilize Smile’s 800 MHz spectrum – a valuable asset that would ramp up Vodacom’s coverage.
- The acquisition deal was proposed last year and expected to be finalized before the end of the last quarter, but due to delays in approvals from regulators and shareholders, the process dragged on for months.
In 2022, Smile Communications was salvaged from financial insolvency by a Saudi-based investor, Al Nahla Group. Smile received US$ 235 million that was intended to smoothen their edges and bounce back into profitability.
But it was unlikely that Smile would make any meaningful progress alone. A 2023 Statista Report indicates that Smile lags behind five well-established telcos. When Vodacom, a company with over 19 million customers, offered to take over Smile Communications – it was only reasonable to accept the deal.
But why is Vodacom interested in a company that does not present any competitive advantage? Their assets. Smile Communications offered 4G Network services which Vodacom has been rapaciously ramping up since 2018. Its closest competitors, Tigo and Airtel, are formidable companies that could easily surpass them especially in the race to 5G network.
The three main telecommunication companies introduced 5G networks last year, but the coverage is limited to major cities like Dar es Salaam, Dodoma, and Arusha. Remote areas still have difficulty even accessing 4G technologies. Smile’s spectrum will allow Vodacom to expand coverage without resorting to more expensive pathways. In 2022, for instance, Vodacom used more than US$ 60 million to purchase network frequencies at an auction.
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