Vodafone seeks control of Safaricom

Johannesburg, 28 Jun 2005

In what is being suggested could be the largest single inflow of foreign direct investment into Kenya in recent years, British mobile phone giant, Vodafone, looks set to purchase a controlling stake in Kenyan cellular operator, Safaricom.

Vodafone, which is indirectly partnered with the Kenyan government, thanks to Telkom Kenya`s 60% stake in Safaricom, currently owns the remaining 40% stake in the Kenyan company.

The East African Standard reports that it has obtained confidential documents showing that Vodafone has put an offer of 7.7 billion Kenyan shillings ($100 million) on the table to acquire an additional 11% stake in Safaricom.

Such an offer suggests the British company values the Kenyan operator, considered to be the strongest telephone brand in the mobile market in East Africa, at nearly $1 billion in total.

According to the report, Vodafone - which already controls the management of the company under a 1999 shareholders` agreement - will offer the Kenyan government $100 million in cash, as well as supporting a listing on the Nairobi Stock Exchange of the remaining 49% of the shares, which it has pre-emptive rights to under the 1999 agreement.

Some of the proceeds from the deal are expected to be used to clear debts that Telkom Kenya owes Safaricom in respect of an interconnect agreement between the two, and the transfer of the controlling shareholding to Vodafone will give Safaricom access to international capital markets.

With Vodafone having now given an undertaking to support an initial public offering of Safaricom shares, the government has a window through which it can make it possible for ordinary citizens to own shares.

Meanwhile, Safaricom has announced that it has signed an agreement with Uganda Telecom and Vodacom Tanzania to launch a roaming service that will allow subscribers to make calls to Uganda and Tanzania at the cost of a local call.

Safaricom`s chief executive, Michael Joseph, says that in three months, the company will also introduce multimedia messaging, enabling subscribers to send picture messages to mobile phones. It will be only the third African country after SA and Egypt to have the service.