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Vodafone ups stake in Vodacom after transferring direct interest in Kenya's Safaricom

16 May 2017

Vodafone Group Plc is simplifying its holdings in sub-Saharan Africa, selling a US$2.6 billion stake in Kenya's Safaricom Ltd to its majority-owned Vodacom Group Ltd.

After recent deals in India and the Netherlands for Vodafone International, Vodacom's Safaricom acquisition provides the English-based firm with a second market-leader within the African region, after Vodacom in South Africa.

Vodacom acquires an 87.5% shareholding in Vodafone Kenya, which represents a 35% indirect interest in Safaricom. Vodacom has agreed to a two-year exemption from the rule with the bourse, the company said.

According to Bloomberg, Safaricom makes up 71 percent of the mobile-customer market share in Kenya.

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Vodacom CEO Shameel Joosub, presenting the group's 2017 financial year-end results at the JSE on Monday, explained that Safaricom offered exciting and strong ongoing growth opportunities, particularly as, with a total population of 45-million, Kenya only had a mobile penetration rate of 88%. A similar all-share deal with Vodacom for Vodafone Ghana would boost Vodafone's stake in the South African unit even more, aggravating the float issue, he said. For its part, Nairobi-based Safaricom is under pressure from lawmakers and regulators because of its dominant position in the market, and is facing calls to split.

Vodacom also expressed their desire to "create further value through closer cooperation between both companies, including best practice sharing; replication of Safaricom's success in M-Pesa in Vodacom Group's other territories; and the creation of new pan-African enterprise solutions in contiguous markets in East Africa".

Analysts have previously said that M-Pesa, which has struggled to gain traction in some of the continent's more developed economies such as South Africa, doesn't hold much value for consumers who are already included in the formal banking sector.

Shares in Vodacom rose 0.2 percent on Friday to 152.49 rand.

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A representative for Vodafone declined to comment.

Vodacom declared a final dividend per share of 435 cents, same as the previous year.

South Africa service revenue increased 5.6%, aided by strong customer net additions of close to 3.0 million, while worldwide operations service revenue declined 5.6%, normalised up 2.2%, mainly impacted by currency volatility and customer registration processes.

The group's service revenue increased 2.3% and group revenue was up 1.5% during the year under review, a reflection of the strategies the company had set for itself.

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Vodafone ups stake in Vodacom after transferring direct interest in Kenya's Safaricom