Vodafone transfers a 35% interest in Safaricom to Vodacom

Posted May 16, 2017

South Africa's mobile phone service provider Vodacom will earn Sh13.6 billion from Safaricom's recently announced Sh48 billion net profit if the deal to acquire 35 per cent stake in the Kenyan firm gets regulatory approval.

The sale could be the first step for Vodafone, which also operates in Ghana and Ethiopia, to transfer more of its African assets into Vodacom. It also concentrates Vodafone's African holdings more fully into Vodacom, simplifying management and continuing a push by the Newbury, England-based parent to tidy up its developing-markets investments. Based on the agreed terms of the transaction, Vodafone will be exchanging a 35% indirect interest in Safaricom for 226.8[1] million new ordinary Vodacom shares.

Ownership of Safaricom is now split between the government of Kenya (35%), Vodafone Kenya (39.93%), public investors (25%) and Safaricom employees (0.07%), so once the acquisition is finalised, Vodacom, with 65 percent of its own company owned by Vodafone International, would become a majority stakeholder.

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Safaricom is the market leader in Kenya with a 71% mobile-customer market share, and is under pressure from lawmakers and regulators who are debating whether it has a dominant position in the market. "Acquiring a strategic stake in Safaricom will provide our shareholders with access to a high growth, high margin, high cash generation business operating in a high growth market".

"Vodacom Group sees scope to create further value through closer cooperation between both companies, including replication of Safaricom's success in M-Pesa in Vodacom Group's other territories".

Vodafone will retain a 12.5% shareholding in Vodafone Kenya.

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A statement from Vodacom described Safaricom as "a prized asset on the African continent", particularly with regard to its m-Pesa mobile money platform, which has over 19 million users.

In operational terms, the group - which has operations in South Africa, Tanzania, the Democratic Republic of the Congo (DRC), Lesotho and Mozambique - closed out previous year with more than 66.786 million subscribers, up 8.9% on an annualised basis.

Vodacom shares rose 0.4 per cent to 153.04 rand as of 2:51pm in Johannesburg, valuing the company at 228 billion rand (S$23.9 billion).

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Vodacom's South African operation, on Monday, reported a 5.6% jump in service revenue for the year ended March 2017, to R52.1 billion, driven by strong customer additions, with good progress on data and enterprise services.