World mobile phone services leader Vodafone Group plc of the UK is in talks with South Africa''s public sector telephone operator Telkom, for the acquisition of Vodacom, a 50:50 joint venture between Vodafone and Telkom. Vodafone had raised its stake in Vodacom from 15 per cent to 50 per cent in November 2005.

A stumbling block may be South Africa''s Black Economic Empowerment Codes, which seeks to redress the impact of the previous exclusion of blacks during the apartheid regime, which will compel Vodacom to set aside a significant portion of its equity for blacks. Telkom, Africa''s biggest fixed-line company, is expected to sell around 5 per cent of Vodacom to a black consortium. A 7.5 billion rand BEE transaction is slated to be completed by year-end.

Vodafone, which is believed to have preemptive rights to Vodacom shares, has been keen to increase its stake in Vodacom stake, as it is expanding operations in India and Turkey. The British group company already has operations in Kenya and Egypt, and control of Vodacom would extend its operations to Tanzania, Congo, Lesotho and Mozambique. These markets can help the British company compensate for declining margins in West European countries.

Vodafone may be willing to list Vodacom and sell a part of its equity under the BEE laws if it gained control.

In the meanwhile, MTN, the biggest mobile telephony company in sub-Saharan Africa, is reportedly considering a joint venture with Telkom''s fixed line operations to shore up its own position. It is reported that Telkom has received offers for its fixed-line assets from MTN and from a private consortium.