Safaricom and Vodacom may compete for the same markets, analysts say

Safaricom expansion plans could be complicated following the share swap between Vodafone and Vodacom with the South-Africa based mobile telco poised to acquire 35 percent of Safaricom.  

Analysts say the deal could see both Vodacom and Safaricom compete for the same markets with Vodacom.

Standard Investment Bank Head of Research Francis Mwangi told Capital FM Business that the complications may come if both telcos seek to expand outside their operations of Kenya, South Africa, Lesotho, Tanzania, the DRC and Mozambique.

“What will get complicated is which brand will expand, is it Vodacom of Safaricom. For example, if Safaricom wants to take MPESA to Ethiopia, will it go there as Safaricom or Vodacom? Safaricom also has other shareholders who would complicate decisions,” Mwangi said.

He, however, says the move will simplify the management of Vodafone’s sub-Saharan African holdings

The transaction, Vodafone said in a statement, will “strengthen alignment and cooperation between Safaricom and Vodacom and provides greater scope to share talent and expertise across the region as well as internationally.”

Notably, Vodafone says Vodacom will now have access to the ‘attractive’ Kenyan market through ‘one of the most successful and innovative telecoms companies in Africa.”

Following the announcement, Safaricom CEO Bob Collymore said Vodafone had assured the Kenyan government – which owns 35 percent of Safaricom – that the deal “promotes the continued successful expansion of the company as well as the opportunity to drive M-PESA to other markets in the continent.”

Faith Mwangi, a senior analyst at Genghis Capital, says Vodafone’s strategy was to have one platform that holds all assets which makes it easier for management making decisions.

“The move will see Vodacom have a stronger influence in terms of strategy; I, however, do not see any significant changes for the company in the medium term,” Mwangi adds.

On his part, ICT Cabinet Secretary Joe Mucheru says the move won’t change how Safaricom is run.

“It’s like changing money from one pocket to the next.”

“There is no significant impact, other than the way they have restructured their ownership. Vodafone wants to own Safaricom through (its subsidiary) Vodacom. Management will continue to be predominantly Kenyan, the brand will continue to be Safaricom and MPESA will be able to transact now across Africa,” Mucheru said.

Shameel Joosub, Chief Executive Officer of Vodacom Group, said the acquisition will provide Vodacom with an opportunity to diversify revenue growth and profitability.

“Acquiring a strategic stake in Safaricom will provide our shareholders with access to a high growth, high margin, high cash generation business operating in a high growth market. In addition to producing mutually beneficial opportunities for growth, it will create further incremental value through the close cooperation between the two businesses, particularly in driving M-Pesa adoption across our operations.” 

SOURCE:CAPITALFM