Share­hold­ers back Vo­da­com deal

Step closer to R35bn en­try into Kenyan mo­bile mar­ket

The Star Early Edition - - BUSINESS REPORT - Kabelo Khu­malo

VO­DA­COM yes­ter­day took a step closer to fi­nal­is­ing its R35 bil­lion en­try into the lu­cra­tive Kenyan mo­bile bank­ing mar­ket af­ter its mi­nor­ity share­hold­ers gave its deal to ac­quire a 34.9 per­cent in Sa­fari­com the thumbs up.

The deal will see Voda­fone in­crease its in­ter­est in the Vo­da­com Group from 65 per­cent to 69.6 per­cent.

Shameel Joosub, the group chief ex­ec­u­tive at Vo­da­com, said that the trans­ac­tion pre­sented the com­pany with the op­por­tu­nity to di­ver­sify its fi­nan­cial pro­file in a sin­gle trans­ac­tion.

“The vote of con­fi­dence from Vo­da­com’s mi­nor­ity share­hold­ers is an im­por­tant mile­stone in our jour­ney to be­come a lead­ing dig­i­tal com­pany and em­pow­er­ing a con­nected so­ci­ety,” Joosub said.

Ear­lier this year, Vo­da­com an­nounced that it had agreed on a deal in which it would ac­quire a 34.94 per­cent in­di­rect in­ter­est in Sa­fari­com from Voda­fone by ac­quir­ing 87.5 per­cent of the is­sued share cap­i­tal of Voda­fone Kenya.

Voda­fone Kenya is wholly owned by Voda­fone. Voda­fone will re­tain a 12.5 per­cent in­ter­est in Voda­fone Kenya, equiv­a­lent to 4.99 per­cent in­ter­est in Sa­fari­com, af­ter com­ple­tion of the pro­posed trans­ac­tion.

Sa­fari­com is cur­rently 35 per­cent owned by the govern­ment of Kenya, while Voda­fone Kenya holds a 39.9 per­cent stake; pub­lic in­vestors hold a 25 per­cent eq­uity and Sa­fari­com em­ploy­ees 0.07 per­cent. Voda­fone is sell­ing down its stake in Sa­fari­com as part of its drive to stream­line its African busi­nesses. The com­pany pro­vides a range of telecom­mu­ni­ca­tions ser­vices, in­clud­ing mo­bile and fixed voice, SMS, data, the in­ter­net and mo­bile money (M-Pesa) to more than 28.1 mil­lion cus­tomers.

Vo­da­com said Sa­fari­com was the mar­ket leader in Kenya with a 71 per­cent mo­bile cus­tomer mar­ket share. Ac­cord­ing to the In­ter­na­tional Mon­e­tary Fund, Kenya is pro­jected to grow at 6 per­cent per an­num over the next five years.

Dobek Pater, a telecoms an­a­lyst at Africa Anal­y­sis, said the deal pro­vided Vo­da­com with a greater pres­ence in the East African re­gion where the com­pany al­ready had foot­prints.

“It pro­vides Vo­da­com with a di­rect stake in a com­pany that is by far the strong­est telecoms op­er­a­tor in the Kenyan mar­ket – one of the growth mar­kets in Africa – with good fi­nan­cial re­turns,” Pater said.

“This means that Voda­fone Group will have more than 50 per­cent share­hold­ing in Sa­fari­com through its own share and in­di­rectly through Vo­da­com Group shares. It may al­low Voda­fone to bet­ter con­trol Sa­fari­com go­ing for­ward, although I am not privy to how the share­hold­ers’ agree­ments are struc­tured.”

Sa­fari­com’s mo­bile money plat­form, M-Pesa, is an im­por­tant driver of Kenyan eco­nomic growth, pro­vid­ing fi­nan­cial ser­vices to more than 19 mil­lion cus­tomers. M-Pesa, launched 10 years ago, lets peo­ple with­out bank ac­counts use their mo­bile phones to trans­fer money.

The tie-up be­tween Sa­fari­com and Vo­da­com comes just a year af­ter Vo­da­com dropped M-Pesa in South Africa af­ter it failed to gain trac­tion in the coun­try.

In the year ended March, Vo­da­com re­ported that its in­ter­na­tional op­er­a­tions had re­cov­ered from the cus­tomers dis­con­nected in the prior year, adding 2.5 mil­lion cus­tomers, a 9.3 per­cent in­crease to to­tal 29.7 mil­lion. South Africa’s cus­tomer base grew by 8.6 per­cent in the pe­riod to 37.1 mil­lion.

Joosub said the deal found favour with share­hold­ers, be­cause the Kenyan Mar­ket promised good re­turns.

“This is an ex­cit­ing deal that pro­vides Vo­da­com share­hold­ers with ac­cess to a high growth, high mar­gin and high cash gen­er­at­ing busi­ness in the at­trac­tive Kenyan mar­ket.

“The pro­posed trans­ac­tion in­creases our pres­ence in East Africa and makes Vo­da­com a for­mi­da­ble player in fi­nan­cial ser­vices on the con­ti­nent.”

Vo­da­com shares dropped 0.41 per­cent on the JSE yes­ter­day to close at R173.57.

The Vo­da­com World mall in Midrand, Jo­han­nes­burg. Ear­lier this year, Vo­da­com an­nounced that it had agreed on a deal in which it would ac­quire a 34.94 per­cent in­di­rect in­ter­est in Kenya’s Sa­fari­com from Voda­fone.

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