Thursday, July 9, 2009

Vodafone Buys Out Shady Safaricom Shareholder

It has been reported by a Kenyan daily that UK telephony giant Vodafone PLC has brought out its controversial minority shareholder in its Kenyan subsidiary. The Daily Nation newspaper reported that Vodafone may have paid as much as Sh6 billion (US$100 million) for the stake in its local holding company held by Mobitelea.
As we understand it, when Vodafone took its 40% stake in Safaricom back in 2000 - via a local subsidiary, Vodafone Kenya Ltd (VKL) - the company granted an option to a company known as Mobitelea Ventures for 25% of VKL. Mobitelea exercised the option the following year, giving the company an effective 10% stake in Safaricom, and reducing Vodafone's effective stake to 30%.
It then seems that Vodafone brought back half of Mobitelea's stake at the beginning of 2003, giving Mobitelea an effective 5% stake in the company - and Vodafone 35% of Safaricom. Mobitelea is registered in the offshore tax haven of Guernsey.
Following a stock market floatation last year, the Kenyan government owns 35% of Safaricom, 25% is floated on the stock exchange and Vodafone Kenya owns the remaining 40%. Vodafone PLC claims a 35% "economic interest" in Safaricom, though its 87.5% stake in Vodafone Kenya - which in turn owns 40% of Safaricom.
The transaction does not answer questions as to who were the ultimate owners of the shares and why Vodafone entered into a deal with the mystery company in the first place.
Who Owns Mobitelea
The reports that Vodafone has bought out shares of the secretive Safaricom shareholder might come as a relief, especially for the buyer. At the beginning of the decade, Mobitelea indirectly took 10 per cent of Safaricom through a company called Vodafone Kenya, with the balance going to Vodafone of UK. Having earlier disposed of half of its shares, it has finally sold the remaining 5 per cent.
Vodafone will be relieved as Mobitelea, at least in the public eye, has come to represent the worst of the Moi era's sneaky deal-making. Needless to say, that has not left the London Stock Exchange firm looking good.
But what should be of more concern is that Mobitelea has quietly exited — after cashing in what could be billions of shillings — before anyone could get to the bottom of the matter.
Questions persist: How did the Mobitelea owners acquire their shares? How much did they pay? Why has Vodafone declined to reveal their names? Did the UK firm act in the public interest? What did the public gain from the transaction involving a parastatal?

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