Vodacom Making Moves In East Africa, Acquires Majority Stake In Safaricom

Vodacom said to buy R34.6 billion Safaricom stake

Vodacom said to buy R34.6 billion Safaricom stake

Based on the agreed terms of the deal, Vodafone will be exchanging a 35% indirect interest in Safaricom for 226.8 million new ordinary Vodacom shares.

The pending acquisition of a 35% stake in Kenya's largest telecoms group Safaricom will secure JSE-listed Vodacom a high-growth market that is as large as all of its global subsidiaries combined.

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. 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.

Under the deal valued at R34.6 billion rand, Vodacom said it will acquire an 87.5% shareholding in Vodafone Kenya. The ultimate aim is to spread Safaricom's highly successful M-Pesa financial payment platform beyond Kenya.

Safaricom made a success of M-Pesa in Kenya whereas Vodacom's launch of M-Pesa in Tanzania in 2008 and South Africa in 2010 disappointed.

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.

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Vodacom is considering other opportunities in sub-Saharan Africa, although any deals would depend on price, the CEO said in an interview after presenting earnings in Johannesburg.

Safaricom is a high growth, high margin, and high cash generating business. It will continue to have a 12.5 percent interest in Vodafone Kenya, equivalent to five percent interest in Safaricom.

The proposed transaction will improve Vodacom Group's presence in East Africa, jointly increasing the company's growth in financial services customers to 32 million, making it a formidable player in financial services on the continent.

Further, the success of M-pesa, now generating 27% of service revenue and used by 79%, or 19-million, of its mobile customers in the region, could be replicated across other Vodacom territories.

Shares in Vodafone closed up 0.02 percent at 210.9 pence, while Vodacom's share price was up 0.2 percent at 152.8 rand and Safaricom was up 1.2 percent at 20.50 shillings.

Vodacom's interest in Safaricom will contribute about 15% of its earnings before amortisation for the fair value adjustment of assets on acquisition.

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