Zambia hints at fifth telco operator

A fifth telco
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Enough room says
industry regulator.

ITWeb Africa

Sunday, Feb 23rd

R34.6bn deal seals Vodacom's stake in Safaricom

R34.6bn deal seals Vodacom's stake in Safaricom

Mobile network operator Vodacom Group has set its sights on wider influence in Africa having agreed on terms to purchase a 34.94% stake in Kenya's dominant telecommunications services provider Safaricom, held by Vodafone Group pls, in a transaction valued at R34.6bn.

In its announcement, Vodacom stated that this value is based on the company's JSE closing price of R152.49c per share as of 12 May 2017, representing a 5.9% discount to the Safaricom share price on the Nairobi Securities Exchange, and it will finance the transaction by issuing 226.8 million new ordinary shares.

Shameel Joosub, CEO of Vodacom Group, said: "This is an exciting occasion for Vodacom and a unique opportunity to diversify our revenue growth and profitability. Acquiring a strategic stake in Safaricom will provide our shareholders with access to a high growth, high margin, high cash generation business operating in a high growth market. 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."

Vodacom describes M-Pesa as an important driver of Kenyan economic growth and a facility that provides financial services to over 19 million customers.

"The proposed transaction will improve Vodacom Group's presence in East Africa, jointly increasing the company's growth in financial services customers to 32 million, making it a formidable player in financial services on the continent," states Vodacom.

Vodacom's interest in Safaricom proportionally equates to approximately 12.6% of the Group's reported service revenue as announced in its latest results.

Joosub adds: "We have negotiated what we believe is an attractive price for access to an additional 28.1 million customers and one of the most successful and innovative telecoms companies in Africa. The transaction will be financially accretive for Vodacom's shareholders based on FY17 results, excluding the effects of amortisation on intangibles created on acquisition, and will further enhance our investment case and strategic position. Given that this is a related-party transaction, appropriate governance controls have been implemented to ensure that the transaction was and is negotiated, evaluated and executed on an arm's length basis."

The mobile operator has also posted its annual results for the year ended 31 March 2017.

According to the results, the company's Group service revenue is up 2.3% and revenue up 1.5% (normalised for the effects of foreign currency translation).

International operations' service revenue declined 5.6%, normalised up 2.2%, impacted by currency volatility and customer registration processes.

Group data revenue is up 16.4%, which the company say is supported by its strategy of data network investment and device migration.

Group EBITDA grew 2.9% to R31 238 million, with a focus on data expansion and information technology.

According to Joosub, the company invested R11.3billion in its infrastructure, of which R8.5 billion was in South Africa where it expanded 4G coverage to 75.8% of the population and 3G to 99.8%.

"In our International operations, we have recovered from the customers disconnected in the prior year, adding 2.5 million customers for the year. Although short-term pressures remain, we expect the introduction of 'Just 4 You' across all our operations and the continued success of M-Pesa to provide for improved commercial execution to this portfolio. Fuelled by expanding distribution channels and the expansion of products and services on offer, we increased the number of customers that use M-Pesa by 3.7 million to almost 13 million, contributing to a 19.4% rise in M-Pesa revenue,

"In the past year, voice and data prices fell by 14.3% and 16.0% respectively in South Africa where significantly more customers benefitted from using bundles. This brings the cumulative reduction in voice and data prices to 42.2% and 44.3% over the past three years."

Vodacom appointed an independent expert, Deloitte & Touche, to provide a fairness opinion on the proposed transaction, which will be included in the circular that will be distributed to shareholders ahead of a General Meeting in August 2017 at which minority shareholders will vote on the matter.

In a statement issued by Safaricom, Bob Collymore, CEO of Safaricom, is quoted as saying, "The agreement Vodafone Group has reached with the Government of Kenya will ensure Safaricom continues to have strong Kenyan representation at Board and management levels, and promotes the continued successful expansion of the company as well as the opportunity to drive M-Pesa to other markets in the continent."


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