Vodafone’s £5 billion bid to gain control of Vodacom of South Africa has been hit by local political opposition and wrangling over the sale price.

Telkom, South Africa’s dominant telecoms operator and Vodafone’s joint venture partner, confirmed earlier this week that it is holding talks with Vodafone about a possible sale of its stake in Vodacom, South Africa’s biggest mobile operator. The two are equal shareholders in the venture.

The deal would have huge political ramifications. As part of negotiations, Telkom is also seeking to sell off its fixed-line assets to MTN, sub-Saharan Africa’s biggest mobile operator with 48 million subscribers.

A move to sell its fixed-line as well as its mobile assets would reshape the country’s telecoms industry. It would spell the end of Telkom and create a new national champion in the form of the enlarged mobile/fixed-line giant MTN.

The planned deal is expected to trigger strong political opposition and a strong reaction from unions, which fear widespread job losses at Telkom.

Analysts in South Africa have expressed doubt that the Government, which has a direct 38 per cent stake in Telkom and a further 15 per cent through the Public Investment Corporation, would approve a sale of the group’s fixed-line assets. Will Hahn, a specialist in South Africa at Gartner, the research group, said: “The Government has resisted so many calls to privatise Telkom it seems puzzling it would just give in to MTN’s plans.”

However, people involved say it is unlikely the transaction would even have been floated by MTN, which is being advised by Merrill Lynch and Deutsche Bank, without it first running its plans past the Government.

Backers of the plans say that the South African Government is likely to have recognised the proposals as the only feasible route to creating a strong fixed/mobile provider capable of providing the “converged” services now deemed critical by telecoms players.

Attempts to exploit its mobile operation to provide bundled services have proved difficult for Telkom. It is understood that relations between it and Vodacom, and also with Vodafone, have been strained.

Vodafone and Telkom are thought to have disagreed on strategy while Vodafone, which has first right of refusal on Telkom’s Vodacom stake, is thought to have made clear that it would not sell out of the business. There is also understood to be a significant gulf in the price that Vodafone is prepared to pay and what Telkom wants.

Vodacom has also sought to compete against Telkom in some areas.

Those championing the deal believe that union sentiment could be helped by the fact that MTN’s chairman, Cyril Ramaphosa, is the former head of the National Union of Mine-workers, the biggest South African trade union.

Meanwhile, Vodafone confirmed yesterday that it is seeking to buy the Italian and Spanish operations of Tele2, the Swedish telecoms company, as part of plans to enable it to supply fixed-line broadband internet to its customers. A deal is likely to be worth about €500 million (£340 million).

Earlier this year the British group lost out in the auction for Ya.com, the Spanish internet business, to France Télécom, owner of the rival mobile group Orange.

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