The pending acquisition of a 35% stake in Kenya’s largest telecoms group Safaricom will secure JSE-listed Vodacom a high-growth market that is as large as all of its international subsidiaries combined.

The R35-billion deal, expected to be concluded in August, presented South Africa’s largest telecoms group upside potential for further mobile penetration and data growth in the fast-growing Kenya market, as well as that of its East African neighbours.

Vodacom CEO Shameel Joosub, presenting the group’s 2017 financial year-end results at the JSE on Monday, explained that Safaricom offered exciting and strong ongoing growth opportunities, particularly as, with a total population of 45-million, Kenya only had a mobile penetration rate of 88%.

Safaricom, with a 71% mobile customer market share, boasted 28.1-million of these customers, the base of which increased at a compound annual growth rate (CAGR) of 8.1% over the last five years.

Some 69% of Kenya’s mobile customers were using data, with Safaricom’s well-invested network infrastructure and spectrum portfolio boasting second-generation mobile coverage of 95%, third-generation of 85% and fourth-generation of 25%.

Further, the success of M-pesa, currently generating 27% of service revenue and used by 79%, or 19-million, of its mobile customers in the region, could be replicated across other Vodacom territories.

Safaricom’s M-pesa customer base reported a 15.9% five-year CAGR.

Safaricom’s “strong historic operational performance" is expected to continue – the group recorded an average revenue per user CAGR of 6.6% over the last five years, along with a double-digit 14.8% revenue CAGR and a 48% adjusted earnings before interest, taxes, depreciation and amortisation margin.

Vodacom’s interest in Safaricom will contribute about 15% of its earnings before amortisation for the fair value adjustment of assets on acquisition.

While Safaricom is “highly complementary” to Vodacom’s existing footprint, the move will also significantly diversify Vodacom’s revenue growth and profitability with a stronger regional presence in East Africa to drive regional and Pan-African enterprise propositions and solutions.

“The proposed transaction offers an opportunity to diversify Vodacom’s economic exposure and earning’s profile in a single transaction,” Joosub said.

To complete the acquisition, Vodacom will issue its parent company Vodafone Group with 226.8-million new ordinary shares, which priced at R152.49 at close of day on Friday – a 5.9% discount to Safaricom’s share price on the Nairobi Securities Exchange.

Following the conclusion of the transaction, Vodacom will be entitled to appoint three directors to the board.

Kenya’s government owns 35% of Safaricom, while public investors and Safaricom employees hold 25% and 0.07% respectively.

Vodafone will retain a 12.5% shareholding in Vodafone Kenya.

The acquisition remains subject to regulatory and shareholder approvals.