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Summary

Vodacom Group, a leading South Africa-based mobile operating group, has recently announced that it is acquiring a strategic stake in Safaricom, Kenya’s leading converged operator, a move that will provide Vodacom with market diversification to power its revenue growth and profitability in Africa. In addition, the proposed acquisition will help Vodacom use Safaricom’s expertise in M-Pesa to drive the adoption of the service across its operations in sub-Saharan Africa.

Acquisition offers Vodacom an opportunity to drive M-Pesa business across its footprint markets

Vodacom Group has entered into an agreement to acquire the 34.94% stake held by its parent company, Vodafone Group, in Kenya’s Safaricom, in a transaction estimated to be worth ZAR34.6bn ($2.58bn), subject to regulatory approvals in both Kenya and South Africa. To fund the transaction, Vodafone plans to float 226.8 million new ordinary shares on the Johannesburg Stock Exchange at the current market rate of about ZAR1,152.49 per share.

Vodacom’s interest in Safaricom is due to its sound financial and operational position as the leading converged telecoms operator in East Africa. Its active mobile subscriber base reached 28.1 million at end-March 2017, with its number of active data subscribers at 16.6 million, accounting for 59% of the total. Its M-Pesa mobile money service has about 19 million active users and recorded revenue of KES55.1bn in the 12 months to end-March.

For Vodacom, the acquisition is an important move to improve its presence in East Africa, where it runs a successful operation in Tanzania through subsidiary Vodacom Tanzania. It offers a great opportunity to diversify its operations by accessing a high-growth, high-potential market in the region. In addition, Vodacom will use the success of Safaricom’s M-Pesa platform in Kenya to build a strong mobile money brand in sub-Saharan Africa.

For Safaricom, the development might not lead to any significant changes in its strategies in the Kenyan market, in terms of both operations and management. Because Vodafone owns a substantial stake in Vodacom, the move is akin to a restructuring of ownership in Safaricom by transferring the stake from a parent company to a subsidiary. However, both Vodacom and Safaricom might seek new opportunities jointly that could offer them a competitive edge over other operators in the region.

For the Kenyan market, the proposed acquisition will translate to the widening of Safaricom’s product and service portfolio across Vodacom’s footprint, with benefits including lower roaming tariffs and M-Pesa interoperability.

Appendix

Further reading

Vodacom Group Update, TE0015-000416 (December 2016)

Author

Danson Njue, Research Analyst, Middle East & Africa

danson.njue@ovum.com

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