Vodacom to acquire strategic stake in Safaricom for R35 billion
Dear Colleagues,
I have exceptionally exciting news to share with you. In addition to announcing a solid set of financial results this morning, the Vodacom Group has agreed on terms with Vodafone to buy a strategic interest (just under 35%) in Kenya’s market leading telco, Safaricom. To put it into context, the Safaricom transaction is worth R34.6 billion, making it almost five times bigger than the Neotel offer.
Apart from being a household name in Kenya, Safaricom is a high growth, high margin, high cash generation business that operates in a high growth market. Closer cooperation with a quality asset like Safaricom will create further value and mutually beneficial opportunities for both companies including the likes of best practice sharing, replicating Safaricom’s success in M-Pesa in Vodacom’s other territories as well as creating new pan-African enterprise solutions in other east Africa markets.
Safaricom’s leading mobile money platform, M-Pesa, is an important driver of Kenyan economic growth, providing essential 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.
From a Vodacom perspective, it offers a rare opportunity to diversify our revenue growth and profitability – all in a single transaction. For example, if we included Safaricom into the Annual Results we issued this morning, it would have proportionally equated to 12.6% of the overall group’s service revenue. It will provide a platform for further growth that we firmly believe will be to the benefit of you, our colleagues, our customers and clients, our shareholders and the communities in which we operate. Specifically, I want to emphasise the benefits from enhanced career prospects, including greater international job opportunities.
As is the case with transactions of this nature, there are certain regulatory and shareholder approvals that we will need to secure before it is finalised. As this is a related-party transaction (we are buying a stake from Vodafone, our parent company) we have made sure that all appropriate governance controls have been implemented. We have negotiated this transaction on an arm’s length basis and will see to it that it is evaluated and executed in the same spirit as we need to ensure the equitable treatment of the interests of minority shareholders in particular.
I am confident that we have negotiated an attractive price for access to an additional 28.1 million customers and one of the most successful and innovative telecoms companies in Africa. It also sets us up to occupy a leading position in sub-Saharan Africa with exposure to one-third of the region’s gross domestic product.
These are exciting times and I promise to keep you updated on the progress we make, as and when we can.
possunt quia posse videntur