South Africa’s Vodacom Group is set to acquire a 35% stake in Safaricom giving it an opportunity to diversify its revenue growth and profitability and build on Safaricom’s M-PESA platform for growth across the larger East Africa.

Earlier Vodafone UK owned 40% while  the Kenyan government through the Treasury owns 35%. The rest is owned by corporate and individual shareholders. The transfer of 35% to Vodacom South Africa gives it control of the firm together with the Kenyan government.

According to Shameel Joosub, Chief Executive Officer of Vodacom Group, “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.”

The 35% Kenyan government stake in Safaricom will remain unchanged while UK’s Vodafone PLC will retain just 5% stake in Safaricom. The deal gives South Africa’s Vodacom control to Safaricom’s M-Pesa, which is an important driver of Kenyan economic growth, providing essential financial services to over 19 million customers.M-PESA already failed in South Africa as a USSD platform but with a new app, Vodacom might be interested in trying the services again. However, the markets are totally different and M-Pesa’s success, heavily pegged on peer-to-peer transfers might not be easily replicated to other markets.

Though not rebranding Safaricom to Vodacom at the time, the proposed transaction will improve Vodacom Group’s presence in East Africa, jointly increasing the company’s growth in financial services customers to 32 million, making it a formidable player in financial services on the continent.

Vodacom’s interest in Safaricom proportionally equates to approximately 12.6% of the Group’s reported service revenue as announced in its latest year end results. The transaction provides a large level of diversification in a single transaction and Safaricom is highly complementary to Vodacom Group’s existing footprint.