Vodacom Eyes Bigger Stake in Safaricom Amid Kenya's Privatization Push

Vodacom Group is reportedly in early-stage talks with the Kenyan government to potentially acquire part of its stake in Safaricom Ltd., one of East Africa's most valuable companies. The Johannesburg-based telecommunications giant already holds a 39.93% stake in Safaricom and is exploring ways to increase its ownership. No final decisions have been made, according to Bloomberg News.

The company declined to comment on the matter when approached for confirmation. Kenya's National Treasury officials were also unavailable for immediate comment. The discussions come amid Safaricom's strong financial performance, with its valuation currently standing at $9.13 billion.

Safaricom remains the dominant mobile operator in Kenya, with nearly two-thirds of the country's mobile subscribers. It also runs the wildly successful M-Pesa mobile money platform, which is central to Kenya's digital economy. Vodacom has previously expanded its stake in Safaricom, most notably through an all-share deal with its UK parent company in 2017, according to reports.

Government Revenue Strategy

The Kenyan government's interest in offloading part of its stake in Safaricom appears tied to its broader fiscal strategy. With growing public debt and the need to raise revenue, the government has been actively exploring the privatization of key state-owned assets. Selling shares in Safaricom would provide a significant injection of funds, easing pressure on the national budget.

This is not the first time the government has considered such a move. In August, Treasury Secretary John Mbadi hinted at plans to split Safaricom into three units, a process that would have reduced the government's current 35% stake. However, Vodacom reportedly ruled out spinning off M-Pesa, a critical component of the business.

Safaricom's shares have gained momentum in recent months, with stock prices more than doubling over the past 12 months.

The company has also expanded into Ethiopia, where it operates under a separate business unit and is making progress in a market that presents both growth opportunities and regulatory challenges, according to financial analysts.

Strategic Expansion and M-Pesa

Vodacom and Safaricom are focused on expanding M-Pesa, which has become a cornerstone of financial inclusion in Kenya and is now one of the fastest-growing mobile money services in Africa. The platform's success has led to discussions with regulators in Ethiopia about integrating M-Pesa with the country's national payment switch, EthSwitch. This integration could significantly boost M-Pesa's reach in the East African region.

The collaboration between Vodacom and Safaricom is also centered on leveraging new technologies, including artificial intelligence, to improve customer service and reduce fraud. AI is being used to personalize services, optimize pricing, and detect suspicious transactions more effectively.

Safaricom's management has remained tight-lipped on potential shareholding changes, despite ongoing speculation. CEO Peter Ndegwa stated in a recent earnings call that there had been no formal communication to the board regarding the government offloading its stake. Any such move would require shareholder approval.

Financial Performance and Outlook

Safaricom has delivered robust financial results in recent quarters. For the first half of 2026, the company reported service revenue of KES 200 billion, up 11.1% year-on-year. Kenya's contribution was KES 194 billion, with the group's net income rising by 52.1% to KES 42.8 billion.

M-Pesa revenue continues to be a major growth driver, increasing by 14% compared to the previous year. Mobile data revenue also outpaced voice revenue for the first time, signaling a shift in customer behavior toward data consumption, according to financial reports.

Despite these positive trends, challenges remain. In Ethiopia, currency depreciation and regulatory constraints have limited the company's ability to adjust pricing, impacting profitability. Management remains confident in achieving breakeven for Safaricom Ethiopia by fiscal year 2027, but the lack of pricing flexibility adds to the uncertainty, according to management commentary.

What This Means for Investors

For investors, the potential sale of government shares in Safaricom could reshape the company's ownership structure and influence its strategic direction. A larger stake by Vodacom would align the company more closely with its South African parent, potentially leading to further integration and operational efficiencies.

However, any move to split or restructure Safaricom could also introduce volatility. The company's management has emphasized that its primary focus is on executing its growth strategy, including expanding mobile broadband and enhancing M-Pesa services across the region.

Analysts will be closely watching how these discussions evolve, particularly given the political and economic stakes for both Vodacom and the Kenyan government. For now, the talks remain in the exploratory stage, with no clear timeline for a decision.