American telecommunications corporation AT&T had announced plans for a potential takeover of the Vodafone group.
In Kenya, Vodaphone currently owns 40 per cent of cell phone network company Safaricom.
“Given the fact that Safricom is actually a crowned jewel brand for Kenya, and when you look at the telecom industry in Africa, Safaricom actually stands out especially in terms of fundamentals to how it’s been able to perform. Most importantly the fact that it returns to its shareholders,” Hidalgo Group director Steve Biko told CNBC Africa.
French company, Orange SA has also expressed interest in buying some of Vodafone’s African operations. Orange SA also has operations in Kenya and Senegal.
“My worry is that for Vodafone to be able to sell its African assets, Safaricom will have to be on the table. There’s no way Orange will actually be interested in any Safaricom assets without [it] being on the table,” Biko explained.
“When you look at the telecom industry in Africa, Safaricom tops [it]. When you look at Vodafone’s interests across Africa, its crown jewel is Safaricom.”
Safaricom is Kenya’s largest and most successful cell phone network company, and well known for its mobile money product M-Pesa.
Biko however explained that Kenya did not have a good mergers and acquisitions record, one because of the country’s legal framework, which has allowed a number of foreigners to own some of Kenya’s biggest companies.
Last year, large firms such as car dealership CMC Holdings, sisal estate Rea Vipingo and internet service provider AccessKenya were among the biggest firms that had been bought out and de-listed from the stock market.
If Vodafone sells its 40 per cent stake in Safaricom, Biko added that there could be a significant impact in the stock market.
“The NSE is the heartbeat of the economy, and currently over 60 per cent is actually controlled by foreign investors in diverse stock options. If Safaricom is put on the table and Vodaphone wants to sell it, then you’re looking at a slump in the market,” he said.
Biko added that Safaricom has nevertheless had a significantly positive effect on the stock market, in terms of financial development and pushing the economy forward.
“The current management has been able to do a lot in terms of actually going forward. As a country, we need to look at the liberalisation of our economy and the legal framework in terms of being able to protect our crown jewels,”” he said.
“We’re a free economy, we’re capitalists, but at the end of the day, we need to control our economy.”
Biko explained that he supports legislation whereby foreigners interested in investing in the country should do so through local partnerships.
“If Vodafone is actually going to put Safaricom on the table as a majority shareholder, that might be able to invoke the buyout close,” said Biko.
“We need to look at our own agenda in terms of legal reforms in the capital markets to ensure that the aspect of foreign ownership. In terms of going forward, we do not want a country that is actually controlled from somewhere else.”