Vodafone's SAfrican arm Vodacom to take over stake in Kenya's Safaricom

Posted May 16, 2017

A deal to hand a 35 per cent holding in Safaricom to Vodacom, its majority-owned South African subsidiary, values the stake at about £2 billion.

The deal represents a big reshuffle of its African interests for the UK-based worldwide phone company Vodafone, which owns 40% of Safaricom and also 65% of Vodacom. This move would give Vodafone a single entry point into sub-Saharan Africa. The implied share subscription and set-off ratio for the number of new Vodacom Group shares to be issued, in respect of 87,5% of the 39,93% Safaricom shares held by Vodafone Kenya, is equivalent to 1.62 new Vodacom Group shares (cum dividend) for every 100 shares in Safaricom held by Vodafone Kenya.

As part of the transaction, Vodafone Group has given appropriate assurances to the government of Kenya to ensure the ongoing success of the long standing partnership between Safaricom, Vodafone Group and the government.

For Vodacom, which also has networks in Tanzania, Democratic Republic of Congo, Mozambique and Lesotho, the transaction takes it into a market where Safaricom has a 71 percent share and demand is still growing for mobile services, including M-Pesa.

It also shows a commitment by Vodafone to Vodacom, despite the political upheavals that have rocked South Africa in recent months.

All this will leave Vodafone with a raised 70% stake in Vodacom, and a much reduced 5% stake in Safaricom.

The deal, subject to approval from Vodacom Group's minority shareholders, will see Vodafone raise its shareholding in South African company to 69.6 per cent from the present 65 per cent.

Safaricom's mobile money platform, M-Pesa, is an important driver of Kenyan economic growth, providing essential financial services to over 19-million 30-day active customers. "In addition to producing mutually beneficial opportunities for growth, it will create further incremental value through close cooperation between the two businesses, particularly in driving m-Pesa adoption across our operations".

He told South Africa's Business Day publication that it made sense to consolidate operations in Vodacom given the group's "scale, advancement and competence in technology".

Customers in South Africa grew to 8,6% to 37,1m.

"While Safaricom share-- in some segments remain high, we firmly believe this has been attained through prudence investment and continuous innovation, both of which are integral to our strategy", Collymore said on May 10.

Valuation of Safaricom shares, that will go to Vodacom, is based on the Kenyan firm's share price on Friday last week.