Category Archives: Vodacom

Safaricom’s Ethiopia License Bid

This week marked the deadline for bids for two new Ethiopia telecommunication licenses on April 26. Two offers were received in Addis Ababa; one by MTN (Mauritius) and the other for a “Global Partnership for Ethiopia”, a consortium by Vodafone, Vodacom, Sumitomo and Safaricom.

This is part of an overdue privatization push by Ethiopia that has continued even as political tensions have flared up in different parts of the country. The licenses do not include mobile money, but that is something that currently monopoly, Ethio Telecom has been granted and hopes to launch soon. It is expected that others who did not bid for mobile licenses such as Orange may bid for the partial privatization of Ethio Telecom which has 50 million subscribers.

Can Safaricom grow in this market 110 million population strong-market? That has been a goal of Safaricom’s management for the last few years. But a January 2021 report by Citi Bank was negative on the “high risk, high return” venture which will impact Safaricom’s earnings in the short to medium term. This was due to the impact of Covid-19 on the risk profile of all potential investors in Ethiopia, but also as, by taking a controlling stake in the consortium, the Ethiopia operations will be consolidated in Safaricom’s financials. Citi expects that Safaricom would raise half a billion dollars of debt to contribute to the consortium which would put an end to special dividends paid by the firm.

After technical and financial evaluations of the two qualified bids, a decision is expected by mid-May 2021.

Also, see more about MTN, from their Nigeria listing.

EDIT May 24, 2021:

  • The Global Partnership for Ethiopia welcomed the award of a license to operate telecom services in Ethiopia. Safaricom is the lead partner in the consortium which will establish a new company in Ethiopia that aims to start providing telecommunications services from 2022. The country has 112 million people and is introducing competition as part of economic reforms supported by the International Finance Corporation.

EDIT May 25, 2021:

  • The consortium bid $850 million and will get a 15-year license, with the possibility of one extension of the same duration. Safaricom has incorporated an SPV, the Vodafone Ethiopia Holding Company in the UK, in which it owns 90% and Vodacom 10% – which will own a company in the Netherlands, that it intends to move to Kenya, and get shareholder approval at their upcoming AGM, to operate it as a subsidiary. The SPV will own 61.9% (Safaricom 55.7%, Vodacom 6.2%), and other shareholders will be Sumitomo (27.2%) and CDC (10.9%).

EDIT June 8, 2021:

  • Vodacom CEO Shameel Joosub said their group serves 180 million in Africa with 58 million accessing financial services on M-Pesa, Africa’s largest mobile money platform that processes $24.5 billion a month. It has now expanded to international money transfers, loans, savings and lifestyles ad lifestyle and could be used to enable small Ethiopian businesses to access e-commerce. Also, the launch of mobile money services in 2022 will ensure financial inclusion and close the gender gap.
  • Prime Minister Abiy Ahmed Ali said Ethiopia will next offer 40% of Ethio Telecom to a foreign investor with another 5% to the Ethiopian public. Also, they will adjust policy (mobile money) and re-tender the second national telco license as he called on all the telco players to coordinate to connect everyone.

EDIT July 5, 2021

  • Safaricom appointed a new Managing Director for Ethiopia, Anwar Soussa.
  • Safaricom released the notice for the AGM on July 30 where shareholders will be asked ratify the Ethiopia deals.

EDIT July 15: The Ethiopian Communications Authority (ECA) issued a fifteen-year telecommunications operator license to “Safaricom Ethiopia PLC,” a newly incorporated local company.

Safaricom Governance Changes

Appearing in today’s newspaper was a notice for the Safaricom shareholders annual general meeting (AGM) that will take place on September 1. In addition to the usual shareholder resolutions, there are additional matters that will be approved, mainly relating to governance by at Safaricom. This all follows the buyout of UK’s Vodafone stake in Safaricom, by South African Vodacom in an internal Vodafone group corporate realignment earlier this year that has now been completed.  A running theme seems to be to entrench Kenyan citizens in the governance and influence at what is now Kenya’s most valuable company.

Some of the changes:

  • The company Chairman shall be a Kenyan (this is now going to be mandatory and is spelt out in the company’s articles of association)
  • Directors shall encourage retention of a “Kenyan character” in the senior management and executive committees of Safaricom.
  • The articles are also changed to spell out that that the independent non-executive directors of Safaricom, shall all be Kenyan citizens.
  • The position of Deputy Chairman is eliminated.
  • Directors appointed by Vodafone shall be excluded from voting on agreements relating to M-Pesa.
  • Directors appointed by Vodafone are to vote in the interest of the company (Safaricom) if its growth and investment decision clash with those of Vodafone.
  • Directors shall appoint the Managing Director Previously as indicated in documents from the Safaricom IPO, Vodafone directors had veto power over the appointment over approval of business plans, annual budgets, the appointment of the Managing Director (Chief Executive Officer) and appointment of the Financial Director (Chief Financial Officer). Now, the Safaricom articles will change to read that “75% directors must approve these provisions” including a new one of “any material change to the company brand”. Shareholders at the AGM will also approve a name change of the company to “Safaricom PLC” in compliance with Kenya’s new companies law for listed companies to be “PLC”

EDIT: At the 2019 AGM, held on August 30 in Nairobi, shareholders will be asked to approve a special resolution to amend the maximum number of directors to be 11, not 10, and have a majority of independent directors be Kenyan. The announcement comes a few weeks after Bob Collymore, the Company’s long-serving CEO, passed away. His predecessor, Michael Joseph has been appointed to serve as interim CEO until the Board picks a successor to Collymore.

Farewell Safaricom Kenya, Hello Africa

Two weeks ago, Vodacom minority shareholders vote in favour of the Safaricom transaction, an acquisition of 35% of Kenya’s leading Telco from Vodafone (UK) – in a deal valued at 35 billion rand (275 billion shillings / $2.7 billion). This they did by approving of purchase of the entire 87.5% of Vodafone Kenya from Vodafone in exchange for 226 million new shares in Vodacom South Africa and not more than 50 million rand in cash (and within two years, Vodafone will sell up to 36.3 million of these shares to comply with SA listed company rules)

The Vodacom group has 66 million customers and 13 million m-pesa ones – and will add on 28 million Safaricom ones (including 19 million m-pesa ones) who use over 100 different products. 

Some excerpts from official Vodacom documents:

  • The transaction would further enhance its position as a leading African mobile communications company and acquiring Safaricom provides Vodacom with a unique opportunity to diversify its financial profile in a single transaction (as at June 2017 about 80% of their 20.7 billion rand group revenue for the quarter was from south Africa)
  • Vodacom Group Chief Executive Shameel Joosub: This is an exciting deal that provides Vodacom shareholders with access to a high growth, high margin and high cash generating business in the attractive Kenyan market. The proposed transaction increases our presence in East Africa and makes Vodacom a formidable player in financial services on the continent.

For Safaricom:

  • The deal was expected to conclude on August 1 and “The proposed share swap is expected to bring to an end a clause that barred Safaricom from venturing outside Kenya ” and “ While Safaricom will still not be free to enter Vodacom markets in Africa, it will now move to new countries where the South African firm does not have a presence. Vodacom will in turn be free to use M-Pesa in its markets” (Vodacom owns stakes of 65% in Tanzania where they have 12 million customers, 51% in Congo with 10 million customers, 85% in Mozambique with 5 million customers (and 2.5 million m-pesa ones), and 80% in Lesotho where they have 1.5 million customers).
  • Vodacom intends to pay 90% of earnings as dividends.
  • For accounting purposes, Vodacom will treat the 39.93% Safaricom stake as an investment in an associate company.
  • Vodafone Kenya currently has a right to appoint, remove and/or replace four of Safaricom’s ten directors – and these rights will move to Vodacom, but Vodafone will have the right to nominate one of the four directors (as long as it retains at least 12.5% of Vodafone Kenya.
    It is expected that Vodafone/Vodacom will still decide who the CEO and Financial Director are (…the appointment of any Managing Director/CEO and the Financial Director/CFO is the responsibility of the Board and is subject to a veto by any Director appointed by Vodafone Kenya)

EAVCA: East Africa Private Equity Snapshot

Ahead of the 3rd Annual Private Equity in East Africa Conference, (taking place on June 15 in Nairobi) the East Africa Private Equity & Venture Capital Association (EAVCA) and KPMG East Africa released their second private equity survey showing increased funding and activity, and with a lot more opportunity for deals to be done.

They estimated that of the $4.8 trillion raised between by P/E funds globally between 2007 and 2016, about $28 billion was raised by Africa-focused funds and $2.7 (including $1.1 billion in 2015-2016) had been earmarked for investment activity in East Africa.

This private equity had funded over 115 deals in the period that were included in the survey. Out of these  the 115 deals, 23 were agri-business, 20 were financial services, 13 manufacturing, and 12 FMGC representing 59% of deal volume. The average deal size had also grown to the $10-15 million range, while in the initial survey it was below $5 million.

East Africa Private Equity Survey

Of the 115 deals, Kenya had 72 deals (63% of the total), Tanzania 19, Ethiopia 8, Uganda 12, and Rwanda at 4. Some of the large deals in the survey, by country, include:

Rwanda: Cimerwa – PPC ($69M), Cogebanque ($41M), BPR-Atlas Mara ($20M), Pfunda Tea ($20M)
Uganda: topped by oil deals CNOOC and Total SA (both $1,467 million), Tullow $1,350M, Total $900M, CSquared-Mitsui $100M, Sadolin-Kansai $88M
Ethiopia: National Tobacco – Japan ($510M), Meta Abo-Johnnie Walker ($255M), Dashen-Duet ($90M), Bedele-Heineken ($85M) and Harar-Heineken ($78M), Tullow-Marathon ($50M)
Tanzania: Africa Barrick Gold ($4,781 million), Tanzania – Pavilion ($1,250M), Vodacom ($243M), Export Trading Co ($210M), Millicom-SREI ($86M), Zanzibar Telecom-Millicom ($74M)
Kenya: Safaricom-Vodacom ($2,600 million), Africa Oil-Maersk ($845M), I&M-City Trust ($335M), Ardan-Africa Oil ($329M), Kenya Breweries-EABL $224M, UAP-Old Mutual ($155M), ARM Cement-CDC ($140M), Wananchi ($130M), CMC-AlFuttaim ($127M), Essar ($120M)

P/E operations: There are about 72 funds operating/focused in East Africa (up from 36 in the first survey) with over 300 employees. 89% of the survey respondents have a local presence in East Africa.

Some of the fund companies that responded to the survey include Acumen, Abraaj, AfricInvest, AHL, Ascent, , Catalyst, Centum, CrossBoundary, Grofin, Emerging Capital Partners, Kuramo, Metier, Mkoba, NorFund, Novastar, Phatisa, Pearl Proparco, Swedfund, and TBL Mirror

Returns:  Of  the deals done, survey responders had an average IRR target was 22% while the actual IRR achieved was 19%.  There were 34 exits between 2007 and 2016, with increased recent activity; 2014 (had 7), 2015 (7) and 2016 (6). The preferred mode of exit is sale to a strategic investor (preferred by 78% while this mode accounts for 38% of exits) followed by share buy backs (32%), then sales to another P/E (21%).

Many of the funds in the region are still in early stages, and 54% have made nil returns to their investors. They surveyors estimate there are more opportunities for Africa private equity in health, education, retail, and manufacturing sectors.

Vodacom buys Vodafone Stake at Safaricom

Early this morning a surprising news story first appeared at Bloomberg about Vodacom buying shares at Safaricom. Early interpretations of the story had the Kenya government selling their entire 35% of their most valuable investment to Vodacom.

But later, the official statement from Vodafone (and Safaricom) confirmed that Vodafone was the one selling 35% of their shareholding to Vodacom. It includes a statement by Safaricom CEO, Bob Collymore that the deal “promotes the continued successful expansion of the company as well as the opportunity to drive M-PESA to other markets in the continent.”

  • Safaricom had announced another record earnings year year, last week.
  • Will there be a rebrand to Vodacom? Safari com may be constrained by operating in Kenya. Vodacom just had an IPO in Tanzania whose outcome is pending and M-Pesa has had tremendous strides in Tanzania.
  •  Former Safaricom CEO Michael Joseph resigned from the Vodafone board a month ago to concentrate on his role as Kenya Airways Chairman.
  • Vodafone will remain with 5% of Safaricom – down from 39.93%.