Vodacom eyes R35bn acquisition of 35% stake in Safaricom
JSE-listed Vodacom, which reported steady growth for the financial year ended March 31, on Monday announced the acquisition of an indirect 34.94% stake in Kenya-based Safaricom for R34.6-billion.
The transaction will result in Vodacom buying out 87.5% of Vodafone Kenya, which holds a 39.93% in Safaricom, from the Vodafone Group, through the issue of 226.8-million new ordinary shares, which priced at R152.49 at close of day on Friday.
This represented a 5.9% discount to Safaricom’s share price on the Nairobi Securities Exchange.
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 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,” explained Vodacom CEO Shameel Joosub.
While Safaricom is “highly complementary” to Vodacom’s existing footprint, the move will also significantly diversify Vodacom’s 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,” he added.
The acquisition remains subject to regulatory and shareholder approvals.
FINANCIAL RESULTS
Vodacom delivered steady growth for the year ended March 31, supported by strong growth in its South African operations.
The group’s headline earnings a share increased by 4.5% to 923c, while earnings before interest, taxes, depreciation and amortisation increased 2.9% to R31.2-billion, with margins improving by 0.5 percentage points to 38.4%.
The group’s service revenue increased 2.3% and group revenue was up 1.5% during the year under review, a reflection of the strategies the company had set for itself.
“A year ago, we said that the strategies that we have implemented to differentiate our network experience, to proactively change our pricing and to offer customers more value through segmented and personalised offers, will continue to sustain revenue growth,” Joosub commented.
Service revenue from the South African operations increased 5.6%, owing to the net additions of nearly three-million customers.
However, the international operations reported a 5.6% decline in service revenue.
Vodacom’s data revenue was up 16.4% during the 12 months under review.
“The sustained demand for data remains a key driver for growth with active data users up 8.3% in South Africa and 29.3% across our international operations. Data now comprises 36.3% – up from 31.9% a year ago – of group service revenue,” Joosub said.
In line with this growth, Vodacom reported capital expenditure (capex) of R11.3-billion during the year under review, R8.5-billion of which was injected into the South African operations, with focus on data expansion and information technology.
This brought Vodacom’s capex over the last three years to R37.5-billion, with South Africa securing the lions' share of R25.9-billion.
Vodacom declared a dividend of 830c for the year under review.
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