Vodacom buys Safaricom stake

35% STAKE: JOINT PLAN IS TO GROW M-PESA IN AFRICA

Vodafone is selling a R34.25 billion stake in Kenya’s Safaricom to Vodacom Group.

Vodacom is taking over parent company Vodafone’s slice of Safaricom, giving it instant access to its M-Pesa money transfer service and 73% of Kenyan cellphone users.

Vodafone Group is simplifying its holdings in sub-Saharan Africa, selling a $2.6 billion (R34.25 billion) stake in Kenya’s Safaricom to its majority-owned Vodacom Group.

The all-share deal will transfer a 35% 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%.

M-Pesa reach

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 England-based parent to tidy up its developing-markets investments.

“It’s a big step in terms of the commitment of Vodafone to Vodacom,” the South African company’s CEO, Shameel Joosub, said. “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 standalone 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 yesterday. The UK company will retain a 5% holding in Nairobi-based Safaricom, Kenya’s biggest company, while the East African country’s government will keep 35%.

Safaricom is the market leader in Kenya with 71% of the country’s subscribers and is under pressure from members of parliament 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 e-mailed 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”.

Vodacom shares rose 1.2% to R154.24 as of 9:38am in Johannesburg, valuing the company at R230 billion ($17.3 billion). Safaricom was little changed in Nairobi.

Steady growth

Vodacom also said yesterday that full-year earnings per share excluding one-time items increased 4.5% to R9.23. Sales rose 1.5% to R81.3 billion. The company raised three-year targets for service revenue to mid-single digit percent growth from low-to-mid single digits and earnings before interest and taxes to a mid-to-high single digit increase. – Bloomberg