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Vodacom's share price recovers after probe spook

Oct 05 2017 16:36
Jan Cronje

Vodacom. (Duncan Alfreds, Fin24)

Company Data

VODACOM GROUP LIMITED [JSE:VOD]

Last traded 116
Change 0
% Change 0
Cumulative volume 394564
Market cap 0

Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

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Cape Town - The share price of communications giant Vodacom [JSE:VOD] recovered during trading on Thursday, after taking a knock on Wednesday following an announcement by the Competition Commission that it would investigate the cell phone giant for ”abuse of dominance”.

On Wednesday the commission, a statutory body mandated to investigate alleged unfair business practices, said it would investigate Vodacom’s "exclusive four-year agreement" with National Treasury to be the sole provider of mobile telecommunication services to the government.

As news of the investigation broke, Vodacom’s share price fell 6.3% from R154.28 to R144.54. It recovered somewhat in later trade on Wednesday but still closed down on the day. 

At 15:45 on Thursday, however, the share price was back to its level before news of the commission’s probe was announced, trading at R154.90. 

Dominant position 

In its media release on Wednesday, the commission said that Vodacom's contract could entrench its dominant position in the market, raise barriers to entry and expansion, distort competition in the market, and result in a loss of market share for other network operators. 

In a statement last night, Vodacom said it was aware of the investigation and was "committed to fully cooperating with the commission".  

"The tender process was initiated and controlled by National Treasury through its procurement officer with the award based on various elements including cost savings, quality of service, security, coverage, support and billing, quality of network and technology innovation,' it said.

"One of the key objectives of which was to reduce Government’s communication costs." 

Vodacom said it was confident that it followed due process in what it termed a "fiercely contested and transparent bidding process" and said it had consulted with the commission prior to the awarding of the contract.

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