Vodafone is in talks to gain control of Vodacom, South Africa’s largest mobile operator, in a £5 billion deal that would extend the British group’s reach in fast-growing markets across Africa.

The world’s largest mobile group shares ownership of Vodacom 50-50 with Telkom, a South African peer that also runs fixed-line services.

If the sale goes ahead, it is thought that MTN, the biggest mobile phone group in sub-Saharan Africa, would take a stake in Telkom. MTN could buy the 38 per cent of Telkom owned by the South African Government to give it a foothold in fixed-line services and a greater presence in South Africa, sources said.

Yesterday, Telkom confirmed that it was holding talks with Vodafone and MTN as part of a review of its business, but it declined to give details. “No decisions regarding the conclusion of this review process have yet been reached,” it said in a statement to the Johannesburg securities exchange.

A Vodafone spokesman confirmed that the group was interested in boosting its stake in Vodacom, which accounts for nearly 60 per cent of the South African mobile market. Analysts said that a deal was likely to be worth about 70 billion rand (£4.8 billion), although the two sides are thought to be wrangling over a price.

The news lifted shares in Telkom to record highs. The stock closed up more than 8 per cent, valuing the group at R102 billion. MTN fell more than 2.5 per cent.

Vodafone has long coveted control of Vodacom, which has operations in South Africa, Mozambique, Lesotho, the Democratic Republic of Congo and Tanzania, and could fit well with the British group’s renewed interest in Africa. Emerging markets, where many users are leapfrogging fixed-line services to take up mobile telephony, are seen as a crucial driver of future mobile revenues.

In its latest reported quarter, Vodacom said that its total number of customers had increased by nearly 30 per cent to more than 32 million in the three months to the end of June, from the same period a year earlier.

The figures suggested that Vodacom had increased its share of a fast-growing market, analysts said. Revenues were up 19 per cent.

The business has provided useful earnings for Vodafone, which last year reaped operating profits of £327 million from its half-share in Vodacom. Revenues for its 50 per cent stake in the group hit £1.5 billion.

Vodafone is thought to have a first refusal on Telkom’s Vodacom shares. However, sources suggested that obstacles remain. It is understood that Telkom has said that it is unimpressed with the price suggested by Vodafone for the mobile business. Relationships between the two companies’ executives are thought to have become strained after disagreements over Vodacom’s strategy amid increasingly fierce competition in mobile markets across Africa.

Sources also said that Vodafone had indicated to Telkom that it could yet be satisfied with a majority stake that fell short of full ownership of Vodacom. Telkom is thought to be disappointed with the benefits its tie-up with Vodafone have brought, with the British group opting to work with rival companies in rolling out bundles of services that combine mobile telephony with internet access and pay-TV. Vodafone lifted its Vodacom stake to 50 per cent from 35 per cent in 2005.

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