South Africa’s Vodacom has made an initial offer to buy its UK-based parent company Vodafone’s majority stake in Vodafone Egypt for 41 billion rand ($2.67bn).
Vodafone Egypt, the country’s biggest mobile operator, is currently 55 per cent owned by Vodafone, while the remaining 45 per cent is held by state-controlled Telecom Egypt. Vodafone owns a 60.5 per cent share in South Africa’s Vodacom.
The acquisition is subject to regulatory and shareholder approvals, Vodacom said in a statement on Wednesday.
“Acquiring a majority stake in Vodafone Egypt would cement Vodacom Group’s position as Africa’s leading technology company 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 per cent of Africa’s GDP,” said Vodacom chief executive Shameel Joosub.
The company, which is listed on the Johannesburg Stock Exchange, said it would fund the acquisition by issuing 242 million ordinary shares at 135.75 rand per share and 8.2bn rand in cash.
Vodacom’s stock rose as much as 5.67 per cent in trading on Wednesday, valuing the company at more than 265bn rand.
Egypt is one of the largest telecoms markets in the region, giving operators a lucrative opportunity for expansion.
Vodafone Egypt has 43 million customers and a 43 per cent market share, with 14 per cent compound annual growth rate in revenue over the past five years, according to the company.
Through Vodafone Cash, it is also the country’s largest mobile wallet provider, with almost 90 per cent of mobile wallet transactions as of August, according to Egypt’s National Telecom Regulatory Authority.
“With more than 80 per cent 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,” Vodacom said.
The transaction is “expected to generate clear benefits” for the three parties, Vodafone said. For Vodafone, the world’s second-largest mobile operator, it “simplifies the management of its African holdings”.
Vodacom will be able to diversify its portfolio and accelerate its growth profile, while Vodafone Egypt will benefit from growth in its financial services and Internet of Things.
Vodacom has appointed consultancy PricewaterhouseCoopers to provide a fairness opinion on the proposed transaction, on which minority shareholders will vote in January.
Because this is a “related-party transaction”, parent group Vodafone will be precluded from voting, Vodacom said. The acquisition is anticipated to conclude by March 31.
Telecom Egypt was informed of the initial offer and noted its rights according to an amended shareholders agreement signed in June, it said. These include the right to buy Vodafone’s shares in Vodafone Egypt, should the major shareholder change directly or indirectly.
Vodacom had been established in 1993 as a joint venture between Vodafone and South African telecoms giant Telkom.
Now Africa’s largest wireless carrier, Vodacom has networks in Democratic Republic of Congo, Lesotho, Mozambique, South Africa and Tanzania. It also provides business services to customers in 48 African countries, serving nearly 124 million customers across both segments.
The proposed acquisition of Vodafone Egypt could “accelerate the group’s medium-term operating profit growth potential into double digits”, Mr Joosub said.
An update on targets will be reported in Vodacom’s full year results in May, he said.
Vodafone was previously in talks with Saudi Telecom Company last year to sell its Vodafone Egypt stake for $2.4bn. But the London-listed company said in December it would retain its stake after a series of deadlines to conclude the deal were missed.