Is Vodafone set for a major push into the South Pacific?

Rumours are rife that Vodafone is set to buy a 50% stake in embattled South Pacific Mobile Network Operator, BeMobile which will extend the UK mobile giant’s footprint into Papua New Guinea and the Solomon Islands.

Vodafone is believed to be in advanced negotations to acquire 50% of BeMobile, effectively buying out large and small shareholders, leaving the balance in the hands of existing shareholder, PNG Telikom. BeMobileʼs performance (read: mounting losses and shrinking market share) over the last few years has been hampered by poor management and mounting debts.

A stand-off between 50% government owned Telikom and 35% Hong Kong based shareholder GEMS over key management decisions and appointments has effectively paralysed the company. All the while BeMobile’s debts have been mounting and BSP (Bank of South Pacific) is eager to close the deal. Last-minute hitches aside, Vodafone is expected to make a public announcement soon.

At first glance, there seems to be little in it for Vodafone, given BeMobile’s low market share and crippling debt, however there are three reasons that make this a compelling deal for Vodafone. Firstly, according to Papua New Guinea telecommunication regulator boss George Panaha, the country’s telecommunications authority NICTA will be introducing infrastructure sharing in the very near future.

What this effectively means is that Digicel will be forced to allow open access to its tower network in PNG and elements of its backhaul infrastructure to competitors. Vodafone will be able to piggy-back on Digicelʼs tower infrastructure, increasing its network coverage from around 20% to one matching Digicelʼs footprint.

Secondly, Vodafone upgrading its networks to 4G/LTE (long term evolution) in key markets, and is reportedly planning to ʻsweat assetsʼ by re-deploying equipment to PNG and Solomon Islands. In so doing BeMobileʼs current tower footprint will roughly double, significantly enhancing its network coverage, while keeping its investment in new infrastructure in those countries to a minimum.

Third, Vodafone will be able to expand its footprint from Fiji into PNG and the Solomon Islands. This news will no doubt not be welcomed by Irish-owned rival Digicel whose aggressive pursuit of market share in the Pacific has allegedly alienated several key figures in the region, and consequently it is thought unlikely that Digicel will get a sympathetic ear from regulators or government.

This change will be great news for a market in a dire need of a mobile shake up — as it is expected that Vodafone will put substantial resources behind trying to win back market share, which should lead to great choice and better service for customers — which is what it is all about.