Vodacom on Safari in Ethiopia


Vodacom on Safari in Ethiopia


Published Date: 2021-09-14 | Source: INCE|Community | Author: The Finance Ghost

Vodacom on Safari in Ethiopia

At a time when rival MTN is pulling out of some difficult markets, Vodacom is gently expanding its African footprint. The South African market isn't growing as quickly as important African markets, which is why our local telecoms giants have invested beyond our borders.

In the year to March 2021, international revenue was around 28% of Vodacom group revenue. The group also owns nearly 35% in Safaricom, which would've taken the international revenue contribution from 28% to 38% if the accounting recognised a proportionate share of revenue from Safaricom.

That's not how the accounting works, so I've included this purely to give an indication of the relative size of Vodacom's South African and international interests.

The latest news is that a new mobile telecoms licence has been awarded in Ethiopia, the second largest country on the continent measured by population. The licence winner is a consortium called the Global Partnership for Ethiopia, which consists of various entities and funders including Safaricom and Vodacom.

Vodacom holds a 6.2% direct beneficial shareholding in the consortium. Safaricom is the leader of the consortium, holding a 55.7% stake. Vodacom participates indirectly in that stake through its shareholding in Safaricom.

An announcement on the funding of the Ethiopian entity will be released in due course. From an operational perspective, Vodacom will provide strategic support.

An important additional commercial term is that CDC Group (which holds a 10.9% stake in the consortium) has a put option which allows that group to sell its stake to Vodacom between year 8 and year 10 of the deal. The put option gives CDC Group the right (but not the obligation) to sell its stake if it so chooses. If the option is exercised, Vodacom would have no choice but to buy it.

The value of the option would be the fair market value at the time of exercise, capped to USD1.74 billion, which is around 10% of Vodacom's current market capitalisation.

This is a Category 2 transaction under JSE rules, which means that shareholders won't be asked to vote on the deal.


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