Vodacom Group is set to acquire a 55% controlling stake in Vodafone Egypt, in a R41 billion deal.
The Midrand-headquartered telco announced today it has agreed terms with Vodafone on the transaction, and will fund the acquisition by issuing 242 million new ordinary shares at R135.75 per share and R8.2 billion in cash.
The proposed transaction with Egypt’s largest mobile network operator is subject to regulatory approvals.
Vodafone Egypt holds a 43% revenue market share, and has 43 million consumer and enterprise customers.
The operator is also Egypt’s largest mobile wallet provider through Vodafone Cash, according to the national telecoms regulatory authority. Vodafone Cash had almost 90% of mobile wallet transactions as at August.
Shameel Joosub, CEO of Vodacom Group, says Vodafone Egypt is a perfect fit for his company’s expansion plans on the continent.
“Acquiring a majority stake in Vodafone Egypt would cement Vodacom Group’s position as Africa’s leading techco by advancing our strategic connectivity and financial services ambitions, while increasing our total population coverage on the continent to over half a billion people and more than 40% of Africa’s GDP.
“Vodafone Egypt is ideally positioned to capture growth in a burgeoning ICT market, which means the proposed acquisition provides our shareholders with an exciting revenue and profitability diversification opportunity, and the potential to accelerate the group’s medium-term operating profit growth potential into double digits. We intend to provide an update on our medium-term targets at our full year results, which will be reported in May 2022.”
The Vodafone Egypt transaction is the second similar deal by Vodacom under Joosub.
In 2017, Vodacom Group bought a strategic stake in Safaricom from Vodafone, which Joosub says has proven to be value-accretive.
“We said at the time that we had negotiated an attractive price for Safaricom and we believe this to be the case with Vodafone Egypt. As this is a related-party transaction, we have implemented appropriate governance controls to ensure the transaction was and is negotiated, evaluated and executed on an arm’s length basis.”
Similarly, Vodacom Group says, its shareholders are expected to gain significant value by scaling its multi-product strategy into Egypt.
“With more than 80% of Egypt’s 100 million population unbanked, there is a significant opportunity to leverage its financial services platforms, global partnerships and best practices into this largely untapped market.
“In addition to financial services, Vodacom Group sees attractive synergy potential from combining Vodafone Egypt’s software factory with Vodacom Group’s existing big data capabilities, closer cooperation in scaling Pan-African enterprise and internet of things solutions, enabling the proliferation of digital services through a platform approach, and also talent sharing.”
The telco says, on completion of the acquisition, Vodacom Group will simplify its dividend policy to at least 75% of headline earnings.
“The current policy is to pay at least 90% of adjusted headline earnings, excluding the contribution of Safaricom, and additionally pass-through Safaricom dividends received. Notwithstanding the change in dividend policy, Vodacom Group will still have one of the highest dividend pay-out policies on the Johannesburg Stock Exchange.”
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