Vodafone Group Plc is simplifying its holdings in sub-Saharan Africa, selling a $2.6 billion (Dh9.55 billion) stake in Kenya’s Safaricom Ltd. to its majority-owned Vodacom Group Ltd.
The all-share deal will transfer a 35 per cent stake in Safaricom to Vodacom in return for stock in the Johannesburg-based unit, raising the parent’s stake in its South African business to about 70 per cent. Bloomberg News reported the deal on Sunday.
The transaction gives Vodacom greater access to products such as M-Pesa, Safaricom’s fast-growing mobile-banking service. 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.
“It’s a big step in terms of commitment of Vodafone to Vodacom,” the South African company’s chief executive officer, Shameel Joosub, said on a call with reporters. “Selling the asset to us does show, at least in east and southern Africa, that the assets are all under Vodacom.”
Vodafone’s only other stand-alone business in sub-Saharan Africa is in Ghana, and there have yet to be discussions between the two companies about that unit, Joosub said.
Vodacom will issue 226.8 million new shares to its parent company for the stake, Vodafone said in a statement on Monday. The UK company will retain a 5 per cent holding in Nairobi-based Safaricom, Kenya’s biggest company, while the East African country’s government will keep 35 per cent.
Safaricom is the market leader in Kenya with 71 per cent of the country’s subscribers, and is under pressure from lawmakers and regulators who are debating ways to break its dominant position in the market. The combination with Vodacom “promotes the continued successful expansion of the company as well as the opportunity to drive M-Pesa to other markets in the continent,” CEO Bob Collymore said in an emailed statement.
Vodacom and Safaricom “jointly want to grow the M-Pesa business in the continent,” Joosub said. This deal “is a very strong M-Pesa play because it makes you the biggest financial services player in Africa,” he said.
Vodacom shares rose 1.2 per cent to 154.24 rand as of 9:38am in Johannesburg, valuing the company at 230 billion rand (Dh63.54 billion; $17.3 billion). Safaricom was little changed in Nairobi.
Vodacom also said Monday that full-year earnings per share excluding one-time items increased 4.5 per cent to 9.23 rand, broadly in line with estimates. Sales rose 1.5 per cent to 81.3 billion rand.
The company raised three-year targets for service revenue to mid-single digit per cent growth from low-to-mid single digits and earnings before interest and taxes to a mid-to-high single digit increase.