Vodacom invests hefty R35 billion into Kenya’s Safaricom

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Vodacom is looking to further their African footprint with the recent announcement of its investment in Kenyan telecoms firm, Safaricom.

The deal is subject to regulatory and shareholder approvals and Vodacom will fund the acquisition of a 34.94% stake in Safaricom held by the UK’s Vodafone, by issuing 226.8 million new ordinary shares.

“Based on Friday’s JSE closing price of R152.49 per Vodacom share, this values the proposed transaction at R34.6 billion. This represents a 5.9% discount to the Safaricom share price on the Nairobi Securities Exchange at closing ahead of the announcement,” Vodacom said.

Safaricom is the dominant telecoms company in Kenya, owns M-Pesa, the biggest mobile money service on the continent, and has well over 19 million subscribers in Kenya.

“This is an exciting occasion for Vodacom and a unique opportunity to diversify our revenue growth and profitability. 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. In addition to producing mutually beneficial opportunities for growth, it will create further incremental value through the close cooperation between the two businesses, particularly in driving M-Pesa adoption across our operations,” said Shameel Joosub, CEO Vodacom Group.

Vodacom said the transaction will improve its 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.

Vodacom’s interest in Safaricom proportionally equates to approximately 12.6% of the Group’s reported service revenue as announced in its latest year end results.

“We have negotiated what we believe is an attractive price for access to an additional 28.1 million customers and one of the most successful and innovative telecoms companies in Africa. The transaction will be financially accretive for Vodacom’s shareholders based on FY17 results, excluding the effects of amortisation on intangibles created on acquisition, and will further enhance our investment case and strategic position. Given that this is a related-party transaction, appropriate governance controls have been implemented to ensure that the transaction was and is negotiated, evaluated and executed on an arm’s length basis,” Joosub said.

[Image – CC Erik (HASH) Hersman]