Vodafone to acquire an additional 15% stake in Vodacom Group- 06 November 2008


Expert Member
Aug 4, 2015
Vodafone has agreed to acquire an additional 15% stake in Vodacom Group (Proprietary) Limited ("Vodacom Group") from Telkom SA Limited ("Telkom") for a cash consideration of ZAR22.5 billion (c.£1.4 billion) less the pro rata consolidated attributable net debt of Vodacom Group of approximately ZAR1.55 billion (c.£0.1 billion). The transaction will increase Vodafone's shareholding in Vodacom Group from 50% to 65%. Vodacom Group will be listed on the Johannesburg Stock Exchange ("JSE") and the remaining 35% of Vodacom Group will be demerged by Telkom to its shareholders.

The acquisition is subject to, among other conditions, approval by 75% of Telkom's shareholders and is interconditional upon Vodacom Group being listed on the JSE and Telkom demerging the remaining 35% of Vodacom Group to Telkom's shareholders. Telkom's two largest shareholders, the Government of South Africa and the Public Investment Corporation Limited, owning a combined 58%, have irrevocably committed to vote in favour of the transaction and will become significant shareholders in Vodacom Group following the completion of the transaction. The Government of South Africa has agreed that it will retain a minimum shareholding of 10% in Vodacom Group for a period of 12 months after the listing on the JSE.

Commenting on the transaction, Vittorio Colao, Chief Executive of Vodafone, said:

"As a long-term investor in South Africa we are delighted to be increasing our shareholding in Vodacom Group, the country's leading mobile operator with a presence in four additional African markets. We will continue to support the management team in their strategy of transforming Vodacom into a full service provider in Africa and also look forward to playing a greater role in delivering the broader social benefits of mobile telecommunications in the continent. We are confident that the transaction will deliver value to our shareholders."

Principal benefits

The principal benefits to Vodafone of the transaction are:

Delivers operational control of Vodacom Group, an attractive asset
The leading mobile network operator in South Africa, with a market share of 55%
A portfolio of growing operations: the number one operator in Tanzania, Lesotho and the Democratic Republic of Congo and the number two operator in Mozambique
The leading mobile broadband service provider in South Africa with an expanding total communications service offering across sub-Saharan Africa
Well positioned to capture the growth from the fast-growing enterprise market in Africa following the announced intended acquisition of the telecommunications assets of Gateway Telecommunications
Enhances Vodafone's consolidated growth profile

Vodacom Group delivered 17.1% revenue growth and 15.7% EBITDA growth for the financial year ended 31 March 2008
Provides further opportunities for value creation through network operating cost reductions and procurement benefits
Financial impact on Vodafone

The transaction meets Vodafone's stated financial investment criteria. Following completion of the transaction, Vodafone will account for Vodacom Group as a subsidiary undertaking.

The transaction is expected to be enhancing to adjusted earnings per share from the first year post acquisition excluding the impact of intangible asset amortisation. The transaction will also enhance Vodafone's free cash flow generation per share.

As a result of accounting for Vodacom Group as a subsidiary, Vodafone will fully consolidate Vodacom Group's results which will include the recognition of additional acquired intangible asset amortisation with a corresponding adjustment for minority interests. The increased amortisation arises both from the additional intangible assets resulting from the acquisition of a controlling interest and the revaluation of intangible assets held in respect of Vodafone's existing stake in Vodacom Group. The additional impact on earnings from acquired intangible asset amortisation, net of associated tax and adjusting for minority interests, is expected to be around £250 - £300 million in year 1, around £150 - £200 million in years 2 and 3, and approximately £50 - £100 million thereafter. As a result, the transaction is expected to be dilutive to adjusted earnings per share post acquired intangible asset amortisation for the three years post acquisition and accretive thereafter.

The transaction will be financed through existing cash resources and committed debt facilities.

Other transaction details

Vodafone has agreed with the Government of South Africa, inter alia, that the Vodacom identity will remain visible on the African continent. In addition, Vodafone has agreed that Vodacom Group will be the exclusive investment vehicle through which it will make acquisitions in sub-Saharan Africa (excluding Ghana and Kenya where Vodafone is already present).

Completion of the transaction and listing of Vodacom Group shares on the JSE is expected during the first half of 2009. The transaction is subject to customary competition authority and regulatory approvals and the listing of Vodacom Group.