South Africa’s Vodacom is poised to gain majority control of Safaricom following a proposed acquisition of the Kenyan government’s 15 per cent stake in the telecommunications giant, a move that would elevate its shareholding to 55 per cent and make Safaricom a subsidiary of the Vodafone Group.
Disclosures by Vodafone Group indicate that the transaction would also give Vodafone Kenya Limited (VKL) significant influence over the appointment of Safaricom’s Chief Executive Officer, potentially marking a return to expatriate leadership at the Nairobi Securities Exchange-listed firm.
Vodacom currently owns a 39.9 per cent stake in Safaricom through Vodafone Kenya. The acquisition of the government’s stake would increase that holding to 55 per cent, triggering a new shareholder agreement that outlines governance and leadership structures at the company.
According to documents filed by Vodafone Group with the United States Securities and Exchange Commission (SEC) on May 22, Safaricom’s board would be required to appoint a Chief Executive Officer from a list of nominees submitted by Vodafone Kenya Limited, provided the company maintains majority ownership.
“The Directors may, subject to the provisions of Article 102, from time to time appoint a Chief Executive Officer as an executive director of the company from a list of nominees provided by VKL,” part of the agreement states.
The agreement further provides that Vodafone Kenya Limited will consult the Government of Kenya before the appointment or replacement of the Safaricom chairman or chief executive.
“VKL hereby undertakes, insofar as possible and provided it is aware of the potential appointment, to notify and consult with the GOK prior to the Board appointing or replacing a chairman and/or Chief Executive Officer,” the agreement states.
Despite ceding majority ownership, the National Treasury is expected to retain a 20 per cent stake in Safaricom and will continue to have a role in the appointment of the board chairperson.
The agreement also requires Vodafone Kenya to support the appointment of a Kenyan national as chairperson of the company.
“VKL further undertakes, insofar as possible, to ensure that the Chairman is of Kenyan nationality,” the document states.
Vodafone Group holds a 65 per cent stake in Vodacom, translating into an indirect stake of approximately 35.75 per cent in Safaricom under the proposed ownership structure.
Industry observers note that while Vodacom would gain decisive influence over the appointment of the chief executive, the company has committed to maintaining the majority of Safaricom’s senior management positions in Kenya.
The proposed transaction follows an agreement signed between Vodacom and the National Treasury in December under which the South African telecommunications firm agreed to acquire the government’s 15 per cent stake in Safaricom for Sh204.3 billion.
As part of the arrangement, Vodacom is also expected to pay the government an upfront dividend of Sh40.2 billion on the Treasury’s remaining 20 per cent shareholding.
Safaricom was launched in 2000 after Vodafone Group acquired a 40 per cent stake in the mobile operator through Vodafone Kenya. The company’s first chief executive was Michael Joseph, a South African-born executive who played a key role in transforming Safaricom into East Africa’s most profitable telecommunications company.
The proposed deal is expected to further strengthen Vodafone’s influence over Safaricom while preserving government participation through its remaining stake and governance rights.
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