Vodafone-Safaricom deal reflects 'high-growth' African telecoms sector

Out-Law News | 08 Aug 2017 | 4:37 pm | 1 min. read

The South African-based Vodacom Group has finalised its acquisition of a 35% stake in Kenya's biggest telecoms firm, Safaricom.

Vodacom, which is 65% majority-owned by Vodafone, said the 35 billion rand (ZAR) ($2.7 billion) acquisition, confirmed on 7 August, was "the largest in the company's history". The company said "all regulatory approvals and conditions precedent in both Kenya and South Africa" had been met.

Shareholders "overwhelmingly approved" the proposed acquisition by Vodacom of an indirect interest of 34.94% in Safaricom and the issue of 233,459,781 new ordinary shares in the company to Vodafone, Vodacom said.

Vodacom's chief financial officer Till Streichert said the acquisition would "provide both businesses with opportunities for growth, as well as enable Vodacom shareholders to access a strong performing business in East Africa in a high growth market".

Streichert said: "We expect this transformational transaction will enhance our position as a leading African mobile communications company, providing the group with the perfect opportunity to diversify our financial profile."

Telecoms expert Diane Mullenex of Pinsent Masons, the law firm behind Out-Law.com, said: "Safaricom enjoys a 71% market share of Kenyan mobile subscriptions, and has seen continued success from Vodafone's mobile payment service – Mpesa."

"Having transferred most of its stake in Safaricom to Vodacom, while retaining a seat on the board of Safaricom, the transaction shows Vodafone's continued commitment to the Kenyan market and also helps Vodafone strategically structure its business going forward. As mobile subscription numbers in sub-Saharan Africa have grown rapidly in previous years – predicted to rise to half a billion unique mobile subscribers by 2020 – this region represents an attractive opportunity for Vodafone," Mullenex said.

The Vodacom-Safaricom deal comes just six months after pan-African telecoms operator Liquid Telecom announced plans to provide fibre network access across sub-Saharan Africa after acquiring South African communications network operator, Neotel, for ZAR6.55bn ($494 million).

In June last year, Vodafone announced plans to boost high-speed mobile data services across Zambia under a joint arrangement with sub-Saharan African 4G telecoms operator the Afrimax Group.

A report published in 2015 by The Boston Consulting Group said that sub-Saharan Africa was adopting mobile financial services "at a pace seen in few other places, presenting banks and mobile-network operators with a set of strategic choices that will go a long way toward determining their success in the region".

According to the report, the value of the region's mobile money market could grow to $1.5bn up 2019 as Africa's 'unbanked' use their phones for a variety of financial transactions.