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Vodacom Group, South Africa’s leading mobile operator, announced today that it will acquire a 35 percent stake in Kenya’s Safaricom for 35 billion rand ($2.6 billion). The Johannesburg-based company said the transaction will expand its operations in East Africa and transform the company into a formidable player in mobile financial services on the continent.

As part of the deal, Vodacom will purchase the stake in Safaricom from Vodafone, the British telecoms giant, which hitherto owned a 40 percent stake in the Kenyan mobile operator. Vodafone will retain a 12.5 percent stake in Vodafone Kenya, equivalent to 5 percent stake in Safaricom, according to Reuters.

Safaricom is the largest mobile operator in Kenya with about 39 million subscribers. The company also operates M-Pesa, the country’s leading mobile money platform, which provides financial services to over 19 million customers. The Kenyan government owns a 35 percent stake in Safaricom.

“This is an exciting occasion for Vodacom and a unique opportunity to diversify our revenue growth and profitability,” said Shameel Joosub, Vodacom Group CEO. “Acquiring a strategic stake in Safaricom will provide our shareholders with access to a high growth, high margin, high cash generation business operating in a high growth market. In addition to producing mutually beneficial opportunities for growth, it will create further incremental value through the close cooperation between the two businesses, particularly in driving M-Pesa adoption across our operations.”

Vodacom said it would finance its Safaricom acquisition by issuing 226.8 million new ordinary shares. At the Johannesburg Stock Exchange on Friday, Vodacom’s stock closed at 152.49 per share.

The transaction represents a 5.9 percent discount to the Safaricom share price on the Nairobi Securities Exchange at closing on Friday ahead of the announcement. The deal is subject to regulatory and shareholder approvals.

“We have negotiated what we believe is an attractive price for access to an additional 28.1 million customers and one of the most successful and innovative telecoms companies in Africa,” Joosub said.

In its 2017 full year ended on March 31st, Vodacom said its revenue grew by 1.5 percent to 81.28 billion rand, compared to 80.08 billion rand in 2016. Headline earnings per share – South Africa’s main profit measure – rose by 4.5 percent to close at 923 cents per share as against 883 cents per share in the previous year.

Founded in 1994, Vodacom Group has over 61 million customers in South Africa, Tanzania, Democratic Republic of Congo, Mozambique, and Lesotho. Through its Vodacom Business Africa, the company offers managed services to enterprises in over 40 countries across Africa, including Nigeria. Vodacom is 65 percent owned by the Vodafone Group.

“The transaction will be financially accretive for Vodacom’s shareholders based on FY’17 results, excluding the effects of amortisation on intangibles created on acquisition, and will further enhance our investment case and strategic position,” Joosub said. “Given that this is a related-party transaction, appropriate governance controls have been implemented to ensure that the transaction was and is negotiated, evaluated and executed on an arm’s length basis.”