Vodafone South Africa Said to Buy $2.8 Billion Safaricom Stake

Glen Mclaughlin
May 16, 2017

The deal by Vodafone -of the United Kingdom to transfer 35 of its 40 per cent stake in Safaricom to its sub-Saharan subsidiary will help expand M-Pesa to other African countries, it emerged yesterday.

To complete the acquisition, Vodacom will issue its parent company Vodafone Group with 226.8-million new ordinary shares, which priced at R152.49 at close of day on Friday - a 5.9% discount to Safaricom's share price on the Nairobi Securities Exchange.

Vodacom has released its financial results for the year ended 31 March 2017, which show a big increase in subscriber numbers in its South African operation. The transaction provides a large level of diversification in a single transaction and Safaricom is highly complementary to Vodacom Group's existing footprint. Vodafone will also retain a 5% stake in Safaricom, while 25% of the shares are on a free float being traded in the stock market.

Vodacom CEO Shameel Joosub said that the deal would allow the operator, which is 65% owned by Vodafone, to "diversify our revenue growth and profitability".

The South African government owns a 14% slice of Vodacom and Kenya's regulators could decide that the deal breaches an ownership threshold that would make it compulsory for Vodacom to make a bid for Safaricom as a whole.

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, the wider Vodafone Group and the Government of Kenya.

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"Vodacom's first attempt at a money transfer business wasn't very successful, but this deal could lead to better results", Morning Star analyst Allan Nichols said.

"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".

M-Pesa is a huge cash cow for Safaricom.

The company declared a second-half dividend of 4.35 rand a share, translating to a full-year dividend of 8.30 rand per share.

Shares in Vodacom were up 0.2 percent at R153 at 1043 GMT, when Vodafone's shares were down 0.3 percent at 210 pence. The company is valued at 227 billion rand ($17 billion).

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

Other reports by MaliBehiribAe

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