Vodacom keeps control of Safaricom as it awaits outcome of fast-track appeal

Vodacom on Friday gave an update on its R36bn acquisition of a controlling interest in East Africa’s largest mobile provider, Safaricom, a transaction first announced last year.

Under the deal, Vodacom was set to acquire an effective 20% interest in Safaricom — 15% from the government of Kenya and 5% from Vodafone International Holdings — via Vodafone Kenya.

Following the completion of the acquisition on June 30, the High Court of Kenya delivered a judgment on September 15 relating to a petition challenging certain aspects of the acquisition.

Vodacom and the other affected parties then filed a notice of appeal against the judgment and applied to stay the matter pending the determination of the appeal.

On October 13, the application for a stay order in relation to the transaction came before the Court of Appeal in Nairobi. However, the court decided not to determine the application but instead would fast-track the substantive appeal.

The prevailing status quo in respect of the shares and purchase consideration is to be maintained pending the hearing of the appeal, Vodacom said in a statement on Friday.

The effect of the order is that Vodafone Kenya remains the registered holder of the Safaricom shares acquired from the Kenyan government at the end of June, and the corresponding purchase consideration paid to the government is to be preserved pending the hearing of the appeal, it said.

Vodacom said it remains confident in the strategic rationale for the acquisition and will continue to update shareholders on any material developments relating to the appeal process.

Business Day reported previously that the court’s ruling in September was a major blow to what had been seen as a signature transaction for Vodacom, while also taking out almost $2.1bn from Kenya’s state coffers.

At the heart of the matter is the contestation regarding the constitutional validity of the transaction. In its judgment in September, the court said Kenya’s government had failed to have robust public consultations about the deal, the pricing framework for Safaricom’s valuation was arbitrary and the competition implications of an effective takeover had not been considered.

The ruling came a few months after Vodacom announced the acquisition of Safaricom after winning a major court case in the country, making the acquisition effective from June 30.

The deal has not been all plain sailing for Vodacom. The transaction hit a roadblock earlier this year when the high court issued conservatory orders freezing the state’s plan to sell shares to Vodafone Kenya and Vodacom as a way to complete the deal. Some activists said the process to sell those shares lacked public participation and undervalued the business.

In June, the court of appeal in Nairobi granted the attorney-general’s application and lifted a conservatory order related to the acquisition, thereby allowing the transaction to proceed.

The main petition by activists led by Kenyan politician Tony Gachoka was heard on June 29.