Vodacom Group will book a once-off gain of R23.2-billion on Safaricom in its interim results, even as the Kenyan courts decide whether its purchase of a controlling stake in the operator should be undone.

The gain, disclosed in a trading statement on Wednesday, will lift earnings per share for the six months to 30 September by between 272% and 279%, to between 1 756c and 1 789c. It arises on “the remeasurement of a previously held associate interest in Safaricom”, Vodacom said.

That is an accounting consequence of taking control. When a company gains control of a business in which it already owns a stake, it must revalue that stake at fair value and book any difference from its carrying value as a gain or loss. Vodacom held about 35% of Safaricom before it completed the acquisition of a further 20% on 30 June: 15% from the Kenyan government and an effective 5% from its parent, Vodafone Group. That took it to 55% and made Safaricom a subsidiary.

The gain is tax neutral and does not affect headline earnings per share, the JSE’s main profit measure, which excludes capital items such as this kind of remeasurement. Vodacom expects Heps to rise by between 22% and 27%, to between 570c and 593c, from 467c a year earlier. It did not say how much of that growth comes from consolidating Safaricom from July.

The trading statement does not mention the litigation. In September, Kenya’s high court declared the government’s sale of its 15% stake “unconstitutional, null and void” and ordered the shares restored to the state. Kenya’s government and Vodacom have appealed.

Court fight

On 13 October, the court of appeal ordered that the status quo be maintained until a fast-tracked appeal is heard, leaving Vodafone Kenya, a Vodacom subsidiary, as the registered holder of the shares.

If the high court’s judgment stands, Vodacom’s stake would fall to about 40% and it would lose its majority. The 5% it bought from Vodafone is not affected by the ruling.