South Africa's Vodacom group to up stake in Tanzania subsidiary to 75 per cent

Dar es Salaam. The transfer of nearly 590 million Vodacom Tanzania shares to the company’s majority shareholder and parent firm has been approved by regulators.

This paves the way for South Africa’s Vodacom Group to increase its stake in Vodacom Tanzania to 75 per cent.

Vodacom Group, which currently owns 61.6 per cent of Vodacom Tanzania, is buying 588 million shares from Mirambo Limited for Sh499.8 billion.

Each share will be bought for Sh850, which is higher than the current market price. The shares, which were sold at Sh850 each during the initial public offering (IPO), closed at Sh800 on Tuesday.

According to a statement issued by Vodacom Group yesterday, approvals for the proposed transaction have been granted by the Capital Markets and Securities Authority (CMSA), Tanzania Communications Regulatory Authority (TCRA), Fair Competition Commission (FCC) and Bank of Tanzania (BoT), which issued “no-objection notices”.

“The proposed transaction will be executed on the Dar es Salaam Stock Exchange (DSE) as a pre-arranged transaction,” the firm said in the announcement signed by the company secretary.

Pre-arranged trading allows investors to set prices of listed instruments before execution, and is permitted on the DSE.

Vodacom Group said it had arranged all the necessary funding for the offer and holds a guarantee from a commercial bank licenced in Tanzania. However, the statement did not identify the financial institution.

“The proposed transaction is financed through various sources including internally generated cash flows and reserves and intra-group lending. The acquirer has confirmed the source and availability of funds.”

Stock brokers say the transaction may have a positive impact on the company’s equities by increasing investor confidence.

“When a major shareholder decides to significantly increase its stake it means that there is value which other people might not have noticed. It is actually confident in the subsidiary in terms of future profitability,” Zan Securities chief executive Raphael Masumbuko said.

“It will definitely trigger better prices, and investors may choose to hold or acquire more shares,” he added.

Vodacom Tanzania shareholders approved the sale of the 26.25 per cent stake owned by Mirambo Limited to Vodacom Group during an extraordinary annual general meeting held last November.

“It seems Vodacom Group has confidence in operations in Tanzania, and the prospects of its subsidiary in general,” said a broker, who asked not to be named.

In 2014 the government abolished the 60 per cent foreign ownership limit of listed companies in Tanzania.

Two years later Parliament passed the Finance Act, 2016, which required all telecommunications companies operating in Tanzania to list at least 25 per cent of their authorised share capital on the DSE.

In August 2017 Vodacom went through a Sh476 billion IPO, Tanzania’s largest ever, which attracted more than 40,000 local investors, most of whom were first-time participants in the country’s stock market.

Foreigners, previously banned from participating, bought 40 per cent of the shares.