Vodacom Group to acquire control of Vodafone Egypt for R41 billion
Vodacom Group announced that it has agreed terms with Vodafone to acquire its controlling stake in Vodafone Egypt, one of Africa’s premier telecom operators. Subject to regulatory and shareholder approvals, Vodacom Group will fund the acquisition of a 55% stake in Vodafone Egypt by issuing 242 million new ordinary shares at R135.75 per share and R8.2 billion (US$548 million) in cash. This values the proposed transaction at circa R41 billion or US$2.738 billion.
An established brand, Vodafone Egypt is the largest mobile network operator in Egypt with 43% revenue market share, offering a range of integrated telecommunications services including voice, data and mobile money services to 43 million consumer and enterprise customers. Egypt’s appeal as an investment destination is supported by its economic growth outlook, large, young and growing population and structural reform agenda.
Vodafone Egypt holds a strong network leadership position and is the country’s largest mobile wallet provider through Vodafone Cash. According to the national telecom regulatory authority, Vodafone Cash had almost 90% of mobile wallet transactions as at August 2021.
Vodafone Egypt has a proven track record of consistently delivering strong revenue growth, evidenced by a 14% FY17-21 revenue CAGR, while its future growth potential is underpinned by a broad range of fundamental sector and company specific drivers. In addition to a track record of revenue growth, Vodafone Egypt generates attractive margins and strong free cash flow.
Vodacom Group shareholders are expected to gain significant value by scaling its multi-product strategy or “System of Advantage” 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 IoT solutions, enabling the proliferation of digital services through a platform approach, and also talent sharing.
Vodacom Group appointed PWC to provide a fairness opinion on the proposed transaction, which will be included in the circular that will be distributed to shareholders ahead of a General Meeting in January 2022 at which minority shareholders will vote on the matter. As this is a related-party transaction, Vodafone, which currently holds a 60.5% stake in Vodacom Group, will be precluded from voting on this at the meeting. Once all of the conditions precedent are met pertaining to the proposed transaction, the acquisition is expected to conclude before 31 March 2022.
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 JSE.