Kenya is determined to split Safaricom Plc—East Africa’s largest company—into three separate units, a plan the government is pressing forward with even as it reduces its ownership in the mobile-phone operator.
The Big Picture
The administration of President William Ruto, which plans to sell a 15% stake in Safaricom to Vodacom Group Ltd., envisions carving the giant into:
- A mobile-phone tower operator
- A fintech company (likely leveraging the massive M-Pesa platform)
- A core telecommunications company
Treasury Secretary John Mbadi stated that the government strongly believes this split will cause the firm’s value to “increase exponentially.”
“We need to have that split if we are to maximize the value,” Mbadi said in an interview, confirming discussions with Vodacom are ongoing.
The Details
- Valuation Strategy: The core motive is to unlock and maximize value by isolating high-growth, high-margin sectors (like fintech) from the capital-intensive infrastructure side (towers) and the core service business.
- Vodacom Deal Unaffected: Mbadi confirmed that the ongoing discussions about the split will not impact the $2.4 billion transaction with Vodacom, which is set to increase the South African company’s stake from nearly 40% to 55%, giving it control.
- Stock Market Reaction: Safaricom’s shares have reacted positively to the broader developments, jumping as much as 13% when the proposed Vodacom deal was announced. The stock is up over 65% this year, heading for its strongest annual performance in 12 years.
Looking Ahead
The divestiture, according to Mbadi, has two main objectives for Safaricom:
- Expansion into Fintech: Allowing the company to fully lean into the fintech space.
- Regional Growth: Positioning Safaricom (which already operates in Ethiopia) to expand into more regional markets, a move that will require government approval.
What’s Next: The Kenyan government and Vodacom will continue discussions on the logistics and timeline for the three-way split as the $2.4 billion stake transfer moves toward completion.
Source: Bloomberg
