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“We’re making good progress and getting closer to a solution,” Johan Dennelind, Vodacom’s head of international operations, said yesterday in an interview at the group’s Johannesburg headquarters. Vodacom is 65 percent owned by Newbury, England-based Vodafone Group Plc. (VOD)

Vodacom has been at odds with local minority partner, Congolese Wireless Network SPRL, since at least early 2010, following a plan to inject $484 million into the business, Vodacom Congo SPRL. CWN has said the recapitalization would dilute its 49 percent share because its shareholders don’t have the money to support their half. Vodacom said last year it had agreed with CWN to “explore options” for the unit after disagreements over the funding and operational structure.

Vodacom Congo had 4.8 million subscribers at the end of September, Vodacom said on Nov. 7. It is the third-largest operator in the country, which has over 71 million people and a mobile penetration rate of 17 percent, according to the U.S. Central Intelligence Agency’s World Factbook.

“We’re having constructive discussions with our partners on the Vodacom Congo board,” said Dennelind. , adding that the parties are “nearing completion.”

May Sell Stake

The South African operator has said it won’t invest further in the Congo unit until the conflict is solved, and Chief Executive Officer Pieter Uys said in May last year Vodacom may sell its 51 percent stake to end the struggle. The parties have appointed London-based NM Rothschild & Sons Ltd. to advise on the options. Vodacom today named Ivan Dittrich as Chief Financial Officer from about July 1.

Vodacom shares have climbed 24 percent over the last year, valuing the company at 136 billion rand ($16.9 billion) compared with a 3 increase in the FTSE/JSE Africa Share Index (JALSH). The stock fell as much as 1.1 percent today to 90.31 rand and slipped 0.1 percent to 91.15 rand at 11:45 a.m. in Johannesburg.

Potential for Expansion

The Congo unit hasn’t reported a profit since Vodacom bought a stake in 2001, while the potential for expansion exists as the country’s mobile penetration rate is 17 percent. The group’s international operations, which include the Congo unit, reported an operating loss of 267 million rand in the six months ending Sept. 30. Tanzania is Vodacom’s second-biggest market, where it owns a 65 percent stake in the local unit which had 10.2 million customers at the end of September.

Vodacom is focusing on widening third-generation technology, which gives data and Internet capacity to mobile customers, across the five African nations where it operates, Dennelind said on Nov. 11. Capital expenditure on international operations would be significantly more in the second half of the fiscal year ending March 31 than the $176 million spent in the first half, he said.

“We’re committed to spending whatever it takes to retain our leadership position in our markets,” Dennelind said yesterday.

Vodacom Tanzania is set to invest 100 billion Tanzanian shillings ($62 million) over the next 12 to 18 months to expand and improve its network coverage, Rene Meza, the managing director of the unit said on Dec. 13.

Low penetration

The amount is only a part of what the group will have invested over the next few years, said Dennelind. “We see mobile-phone penetration rising from below the current 50 percent in Tanzania to over 70 percent over the next five years throughout the continent,” he said.

Vodacom will focus its investment on growing markets like Tanzania and Mozambique in the medium term, where penetration is still low relative to the major market of South Africa, said Dennelind. It will bolster growth through infrastructure investments, including data-enabled networks that allow customers to use mobile-phones to access financial services. In Tanzania, Vodacom has signed up more than 2 million users for its M-Pesa product, which allows users to transfer money to others, he said.

To contact the reporter on this story: Sikonathi Mantshantsha in Johannesburg at smantshantsh@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net