Vodacom Pursues Majority Control of Safaricom as Kenya Government Seeks Revenue Through Stake Sale

In a development that could reshape East Africa’s telecommunications landscape, Vodacom Group is in discussions with the Kenyan government about potentially acquiring a portion of its thirty-five percent stake in Kenya’s telecommunications giant, Safaricom PLC. According to sources who spoke to Bloomberg, the Johannesburg-based company, which already owns approximately thirty-nine point nine three percent of Safaricom, is reportedly considering increasing its share, though no final decisions have been made at this stage of the negotiations.

The discussions come at a critical juncture for Kenya’s fiscal planning and represent a potential solution to the government’s urgent need to raise revenue amid mounting debt costs and persistent budget deficits. Safaricom, valued at one point one nine trillion shillings (approximately nine billion dollars), stands as the region’s most profitable telecommunications company and Kenya’s most valuable publicly traded enterprise, making it an attractive asset for privatization despite the political sensitivities involved in reducing state ownership of such a strategic national company.

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Government’s Privatization Push and Revenue Imperatives

The Kenyan government’s willingness to consider selling part of its Safaricom stake emerges from a broader privatization strategy aimed at addressing the country’s challenging fiscal position. National Treasury Cabinet Secretary John Mbadi disclosed earlier this year that the government is seeking to raise one hundred forty-nine billion shillings (approximately one point one five billion dollars) in the two thousand twenty-five to two thousand twenty-six financial year through sales of stakes in state-owned or state-linked enterprises.

However, Mbadi has been candid about the limited options available for achieving this ambitious revenue target. Apart from Safaricom, the Kenya Pipeline Company is seen as the only other viable state-linked firm capable of generating significant privatization proceeds. Many other state-owned enterprises are struggling with years of losses and mismanagement, making them unsuitable candidates for privatization or unlikely to attract serious buyers willing to pay premium valuations.

Safaricom’s consistent profitability and strong cash flows stand in stark contrast to most state-owned entities. The telecommunications operator recently reported a fifty-two point one percent rise in its half-year profit to forty-two point seven billion shillings, helped by a smaller loss in its Ethiopian operations and M-Pesa’s robust double-digit growth. The company’s net profit grew from twenty-eight point one one billion shillings in the previous corresponding period, demonstrating the telecommunications giant’s resilience despite challenging macroeconomic conditions across the region.

Safaricom’s revenue rose to one hundred ninety-nine point nine billion shillings in the six months to September, from one hundred seventy-nine point nine billion shillings in the same period a year earlier, reflecting eleven point one percent growth. This consistent revenue expansion, driven primarily by mobile financial services and data, makes Safaricom an attractive investment opportunity for both strategic investors like Vodacom and potential financial investors who might participate in any secondary share offering.

The Ongoing Debate Over Breaking Up Safaricom

The discussions about stake sales occur against the backdrop of an ongoing debate about potentially breaking up Safaricom into separate entities. In August, Treasury Secretary John Mbadi disclosed that the government was evaluating a breakup of Safaricom into three distinct units comprising telecommunications, towers, and M-Pesa, as part of a strategic review that could fundamentally restructure Kenya’s most valuable company. The restructuring, if implemented, would potentially reduce the government’s stake through the creation of these separate legal entities, each of which could be valued and potentially partially divested independently.

Proponents of the breakup argue that separating these business lines could unlock significant value by allowing each entity to be valued on its own merits and attracting specialized investors with expertise in each particular sector. The mobile money business, M-Pesa, has been particularly identified as potentially commanding a premium valuation given its dominant market position and strong growth trajectory. The Central Bank of Kenya has supported the potential split, arguing it could enhance regulatory oversight of the financial services component, though the bank has also warned that such a restructuring could trigger a seventy-five billion shillings (five hundred million dollars) tax liability.

However, this proposed breakup has encountered significant resistance from Vodacom Group, Safaricom’s largest shareholder and strategic partner. During a November eleventh earnings call, Vodacom CEO Shameel Joosub firmly rejected the idea of spinning off M-Pesa, stating that M-Pesa’s financial services are too deeply integrated with Safaricom’s telecommunications operations to justify a separation.

“We’re not looking to separately list the financial service businesses; we do see it intricately linked to our value proposition that we’re providing to the customer,” Joosub explained during the earnings call. “In fact, we see it becoming even more closely linked, coupled with loyalty going forward.” This statement signals Vodacom’s strategic view that the synergies between telecommunications and financial services represent a core competitive advantage that should not be dismantled.

M-Pesa’s Critical Role in Safaricom’s Success

Vodacom’s resistance to any M-Pesa spin-off reflects the mobile money platform’s extraordinary importance to Safaricom’s overall business model and profitability. Revenue from mobile financial service M-Pesa rose to eighty-eight point one billion shillings in the six-month period ending September, from seventy-seven point two billion shillings in the previous corresponding period, reflecting growth of fourteen percent. This represents the company’s fastest-growing major revenue stream and now accounts for a substantial portion of total service revenues.

M-Pesa’s success extends far beyond simple money transfers. The platform has evolved into a comprehensive financial services ecosystem offering credit, savings, insurance, and international remittances. More than four point three seven billion dollars (five hundred sixty-two point five billion shillings) in affordable credit was distributed to over seven point five million customers and fifty-two thousand merchants through various M-Pesa lending products during the half-year period. This demonstrates how M-Pesa has become embedded in the financial lives of millions of Kenyans, providing access to formal financial services for populations previously excluded from traditional banking.

The platform’s merchant ecosystem has also expanded dramatically, with Lipa Na M-Pesa merchants reaching six hundred fifty-eight thousand six hundred sixty-nine, and agents increasing by two point four percent to two hundred sixty-six thousand seventy-one. Transaction volumes increased by thirty point six percent to nearly seventeen billion transactions during the six-month period, with one hundred sixty-two point zero seven billion dollars (twenty point eight five trillion shillings) traded, representing a ten point seven percent increase in transaction values.

M-Pesa’s integration with Safaricom’s telecommunications infrastructure provides significant operational synergies and competitive moats that would be difficult to replicate if the businesses were separated. The telecommunications network provides the underlying infrastructure for M-Pesa transactions, while M-Pesa increases customer stickiness and provides Safaricom with valuable transactional data that informs network investments and service development. The agent network that serves M-Pesa customers also often handles telecommunications services such as SIM card sales and airtime distribution, creating operational efficiencies that would be lost in a separation.

Vodacom’s Strategic Interest and Historical Relationship with Safaricom

Vodacom Group CEO Mohamed Joosub has explicitly stated the company’s interest in acquiring additional Safaricom shares if the government proceeds with a stake sale. “In terms of increasing stakes, we look at any market where our partners want to sell, we would consider it,” Joosub told investors during the group’s second-quarter earnings call. “And of course, we’d expect that they would talk to us, as we’ve been partners for a very long time… If there is a want to sell, I’m sure they’ll talk to us.”

This statement reflects both Vodacom’s confidence in Safaricom’s prospects and the expectation that as the largest existing shareholder and long-term strategic partner, Vodacom would be given preferential consideration in any government stake sale. Such preference would be logical from the government’s perspective, as Vodacom has demonstrated its commitment to Safaricom’s development over many years and understands the Kenyan telecommunications market intimately.

Vodacom previously increased its stake in Safaricom through an all-share deal with its UK parent Vodafone in two thousand seventeen, demonstrating its long-term commitment to the Kenyan market. That transaction brought Vodacom’s holding to its current level of approximately forty percent, positioning it as the largest single shareholder in East Africa’s premier telecommunications company.

The relationship between Vodacom and Safaricom extends beyond mere shareholding to encompass strategic cooperation, technology transfer, and operational best practices sharing. Vodacom provides Safaricom with access to its broader African experience, procurement scale advantages, and technical expertise, while Safaricom’s market leadership and innovation in mobile financial services have provided valuable learning that Vodacom has applied across its other African operations.

For Vodacom, increasing its stake in Safaricom aligns with the company’s broader strategy of expanding its presence in African growth markets. Safaricom operates in what remains one of Africa’s most dynamic telecommunications and financial services markets, with continuing opportunities for customer growth, increased data consumption, and expansion of financial services offerings. Taking majority control would give Vodacom even greater ability to direct strategy and potentially consolidate Safaricom’s financial results, which would significantly strengthen Vodacom’s overall African earnings profile.

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The Starlink Partnership: Expanding Connectivity Across Africa

In a related development that underscores Vodacom’s commitment to expanding connectivity across its African markets, Starlink, Elon Musk’s satellite internet company, signed a deal with Vodacom to expand high-speed broadband access and strengthen rural network coverage across Africa. Announced on November twelfth, the partnership aims to accelerate digital inclusion and support economic growth across the continent, where traditional telecommunications infrastructure often struggles to reach remote and underserved populations.

The collaboration will integrate Starlink’s satellite backhaul into Vodacom’s mobile network, improving network performance in underserved regions and extending connectivity to remote schools, health centers, and communities. This technological integration represents a significant evolution in African telecommunications infrastructure, combining terrestrial mobile networks with low Earth orbit satellite technology to achieve coverage that would be economically unfeasible using traditional tower-based approaches alone.

Vodacom will also become an authorized reseller of Starlink equipment and services for enterprise and small-business clients across its African footprint, which extends across forty-seven markets. “We are delighted to collaborate with Starlink, a move that accelerates our mission to connect every African to the internet,” Joosub said, highlighting that the partnership aligns with Vodacom’s Vision two thousand thirty strategy. “Low Earth orbit satellite technology will help bridge the digital divide where traditional infrastructure is not feasible, and this partnership will unlock new possibilities for the unconnected.”

The company plans to tailor packages to suit affordability needs across African markets and support a wide range of industries, including mining, oil and gas, agriculture, tourism, retail, and financial services. Products include pay-as-you-use backup internet, what Vodacom terms “unbreakable” internet options providing redundancy for critical operations, device-as-a-service models that reduce upfront costs, and branch network pooling solutions for businesses with multiple locations.

Starlink’s vice president for operations, Chad Gibbs, stated that “Starlink is already serving people, businesses, and organizations in twenty-five African countries. By collaborating with Vodacom, Starlink can deliver reliable, high-speed connectivity to even more customers, transforming lives and communities across the continent.”

Safaricom’s Initial Resistance and Subsequent Opening to Starlink

The Vodacom-Starlink agreement comes with particular significance given Safaricom’s initial resistance to satellite internet competition in the Kenyan market. The telecommunications giant wrote to the Communications Authority of Kenya in July two thousand twenty-four, expressing concerns about granting independent licenses to satellite internet providers without adequate regulatory frameworks and competitive safeguards.

However, Safaricom’s position has evolved as the telecommunications landscape has changed and the complementary nature of satellite and terrestrial networks has become more apparent. Safaricom CEO Peter Ndegwa subsequently announced the company was open to partnership discussions with Starlink, reflecting a pragmatic recognition that satellite technology would play an increasing role in connectivity regardless of incumbent operators’ preferences.

“From a satellite perspective, we have to partner with Starlink or other satellite providers in the future to make sure that the technology plays right through,” Ndegwa told Bloomberg. “We have had some discussions, and we will continue to have those discussions to the extent that they complement what we are offering.” This statement signals Safaricom’s strategic pivot from resistance to collaboration, recognizing that satellite connectivity represents an opportunity to extend services into areas where traditional infrastructure deployment remains economically challenging.

The Vodacom-Starlink partnership now provides a framework through which Safaricom, as a Vodacom affiliate, could potentially access and distribute Starlink services in Kenya, turning what was initially viewed as competitive threat into a complementary technology that extends Safaricom’s addressable market and service capabilities.

Market Structure and Potential Transaction Mechanics

The potential transaction for the government’s Safaricom stake could take several forms. Analysts expect that any sale could be structured either as a secondary initial public offering open to retail and institutional investors, or as a block transaction targeting high-net-worth investors or strategic buyers. A direct negotiated sale to Vodacom would be the simplest transaction structurally, though it might face political scrutiny about whether the government obtained maximum value compared to a competitive process.

Currently, the government and Vodacom each own approximately thirty-five percent of Safaricom, Vodafone holds five percent, and the remaining twenty-five percent is publicly traded on the Nairobi Securities Exchange. If Vodacom were to acquire even a modest portion of the government’s stake—say ten percentage points—it would bring Vodacom’s holding to approximately fifty percent, representing clear majority control and potentially triggering mandatory offer requirements under Kenyan securities regulations unless exemptions were obtained.

Safaricom’s original listing in two thousand eight proved extraordinarily successful, with the offering oversubscribed by five hundred thirty-two percent when the government sold a twenty-five percent stake, raising fifty-one point seven five billion shillings for the Treasury. That demonstrated intense retail and institutional appetite for Safaricom shares, suggesting that a secondary offering might achieve attractive pricing. However, market conditions have changed significantly since two thousand eight, and investor appetite would depend heavily on valuation, the economic outlook, and competing investment opportunities.

For Vodacom, the strategic value of majority control might justify paying a premium to the current market price, as control would provide governance rights, the ability to consolidate financial results, and greater strategic flexibility. However, any premium would need to be justified to Vodacom’s own shareholders in terms of value creation opportunities and return on investment.

Broader Implications for East African Telecommunications

The potential transaction carries significance that extends well beyond the immediate financial terms. For Kenya, reducing the government stake in Safaricom while ensuring the company remains well-managed and continues to contribute to national development objectives represents a delicate balancing act. Safaricom is not just a telecommunications company but a critical national infrastructure provider whose M-Pesa platform underpins much of Kenya’s economy.

For Vodacom, gaining majority control of Safaricom would represent a major strategic milestone, solidifying its position as one of Africa’s pre-eminent telecommunications groups and providing a platform for further expansion of financial services and digital offerings across the region. Safaricom’s successful M-Pesa model could potentially be replicated or adapted for Vodacom’s other markets, creating opportunities for significant value creation beyond Kenya’s borders.

The discussions also reflect broader trends in African telecommunications, where consolidation, the entry of new technologies like satellite internet, and the convergence of telecommunications and financial services are reshaping competitive dynamics. Traditional regulatory barriers are evolving, new business models are emerging, and incumbent operators must adapt or risk being disrupted by more agile competitors or transformative technologies.

Conclusion: Navigating Complex Stakeholder Interests

As negotiations between Vodacom and the Kenyan government continue, multiple stakeholder interests must be carefully balanced. The government seeks to maximize revenue from asset sales while maintaining adequate influence over a strategically important company. Vodacom pursues enhanced control of its most valuable African investment to drive long-term growth and returns. Safaricom’s management must continue delivering operational performance while navigating ownership changes and potential structural reorganization. And Kenya’s citizens and businesses depend on Safaricom’s continued reliable service and ongoing innovation in connectivity and financial services.

The ultimate outcome remains uncertain, with final decisions yet to be made and numerous regulatory, political, and commercial considerations still to be resolved. However, the discussions themselves signal important shifts in Kenya’s approach to state asset management and Vodacom’s strategic ambitions in Africa. As this situation develops, it will provide important signals about the future direction of telecommunications regulation, corporate governance of partially state-owned enterprises, and the evolution of Africa’s digital economy. The resolution of these discussions—whether through a transaction, continued negotiations, or an alternative arrangement—will shape East African telecommunications for years to come.

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By: Montel Kamau

Serrari Financial Analyst

21st November, 2025