MICROCAPITAL BRIEF: Vodacom Paying $2.6b to Its Majority Shareholder, Vodafone, for 35% Equity Stake in Owner of Kenya’s M-Pesa Mobile Money Service, Safaricom

Vodacom, a unit of UK-based Vodafone Group Plc that provides mobile communications services to 61 million subscribers in Africa, is paying Vodafone ZAR 34.6 billion (USD 2.6 billion) for a 34.94-percent stake in Safaricom, a Kenyan mobile network operator.

The value of the transaction is discounted 5.9 percent from Safaricom’s closing share price on the Nairobi Securities Exchange as of May 12, 2017. This reshuffling within Vodafone will be financed by selling an additional 226.8 million ordinary Vodacom shares to the public.

Safaricom was established in April 1997 and went public May 2002. It provides voice, data, financial services and enterprise solutions to 63 million customers as of 2016. The M-Pesa service, which Safaricom launched in 2007, was developed by Vodafone. The “M” stands for “mobile,” and “pesa” means “cash” in Swahili. As of April 2016, M-Pesa serves 25 million clients in Kenya, Afghanistan, the Democratic Republic of the Congo, Egypt, Fiji, India, Lesotho, Mozambique, Romania and Tanzania.

Headquartered in Johannesburg, Vodacom provides mobile voice, messaging and data services to 55 million customers in approximately 40 African countries. For the financial year ended March 31, 2016, Vodacom reported total assets of ZAR 78.5 billion (USD 5 billion), net profit of ZAR 12.9 billion (USD 800 million), return on assets of 18 percent and return on equity of 58 percent.

Vodafone Group Plc, the parent company of Vodacom, is a British telecommunication company based in London. It owns and operates networks in 28 countries and has partner networks in another 47 countries, serving an aggregated total of 516 million customers. For the financial year ended March 31, 2016, Vodafone reported a loss of GBP 3.8 billion (approximately USD 6 billion), total assets of GBP 123 billion (approximately USD 178 billion), return on assets of -1 percent and return on equity of -2 percent.

By Christian Chartier and Chloe Miao, Research Associates

Sources and Additional Resources:

[1] “Vodacom Strikes $2.6b Deal for Safaricom Stake”, African News Agency. http://mobilemoneyafrica.com/content.php?id=3366

Vodacom Financial Statements, 2017

MicroCapital Coverage of Vodacom, May 19, 2016

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