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SECRET company DEALS IN SAFARICOM SHARES. The rich get richer

Secret company to make Sh10 billion in Safaricom deal

Story by NATION Reporter
Publication Date: 3/23/2008

A secretive company whose shares in Safaricom are suspected to have been dubiously obtained stands to make Sh10 billion after the mobile phone’s share offer. Mobitelea Ventures is among the dealmakers, go-betweens and institutions certain to make a killing in the historic IPO next week.

Customers queue for Safaricom M-Pesa services at an outlet in Nairobi. Dealers who have worked to sustain the company’s growth will share Sh1 billion worth of shares that have been set aside for them in the firm’s initial public offering. Photos/FILE

Other beneficiaries will be stockbrokers to National Social Security Fund (NSSF) and the pension organizations from the East African region.

When the trading bell rings on the morning of Wednesday May 30, everyone will be counting gains. Of course none more that Mobitelea Ventures Ltd which holds 12.5 per cent of in Vodafone Kenya.

The Kenya Government, which is selling 25 per cent, owns 60 per cent of Safaricom with Vodafone International and Mobitelea splitting the balance 35:5.

Immediately the first share is put on the soon-to-be liquid three-fifth Safaricom stake owned by Vodafone Kenya. The Kenya Government, which is selling 25 per cent, owns 60 per cent of Safaricom with Vodafone International and Mobitelea splitting the balance 35:5.

Immediately the first share is put on the block, Mobitelea will be worth Sh10 billion. If by any chance the market price doubles on the first day, a high possibility, the owners would afford to build the ten-lane Thika Road (Sh18 billion) and still retain Sh2 billion to buy 550 Hummer H2.

Owning two billion of the 40 billion shares issued, Mobitelea is one of the richest entities in Kenya, never mind faceless.

Each Safaricom unit is worth Sh5, meaning the cellular company is now valued at Sh200 billion. All the Nairobi Stock Exchange firms combined are worth Sh800 billion.

Safaricom last year had the largest haul of revenue in Kenya at Sh47 billion. In comparison, competitor Celtel Kenya with 2.1 million customers is known to have trailed behind with under one-third this amount.

The IPO hopeful with 9.2 customers made over Sh17 billion in pretax profit.  Unfortunately, the list of beneficiaries is unlikely to include joint lead transaction advisors Dyer & Blair and Stanley Morgan who jointly take home a paltry 5 cents; after beating the competition which wanted to do the transaction for ten times this, at 50 cents.

The brokers (and some commercial banks) are expected to shore up their flagging fortunes by banking up to Sh750 million in commissions.

The commissions range from 1 per cent to 1.5 per cent of the Sh50 billion transaction.  Initially, the receiving bank was set to take home Sh94 million, registrar Sh4.8 million, lead and co-sponsoring brokers Sh2.2 million and PR firm Gina Din Sh5.5 million.

At least Sh48 million will go into printing up to one million sets of offer material. Another Sh26 million will be paid in audit and legal fees. CMA takes home 0.3 or Sh150 million while NSE walks home with Sh1.5 million.

It is now emerging that the public, known by the rather condescending appendage of ‘retail investors’ will be competing for just Sh26 billion worth of shares, out of the Sh50 billion total. The share is equal to the amount thrown at the Kenya Electricity Generating Company in the May 2006 IPO.

The small investor, who has to make a minimum investment of Sh10,000, is entitled to a minimum of 100 shares with the balance allocated proportionately to the number of shares applied for — a system called pro rata basis and successfully employed during the Access Kenya IPO.

Following the gazetting over a week ago of the rules allowing East African Community members to participate on equal basis, as citizens of Kenya Burundi, Rwanda, Tanzania and Uganda.

As if that was not enough, fund managers and the so-called qualified institutional investors in the whole of EAC will be allowed piece of the action in another Sh21 billion tranche of shares reserved for big boys.

They include those recognised by Kenya Capital Markets Authority (CMA), Retirement Benefits Authority and the Insurance Regulatory Authority. Others allowed in on the largest IPO in East and Central Africa are the Institute Nationale De Securite’ Social of Burundi, NSSF Rwanda, Uganda and Tanzania.

Kenya has a double taxation agreement with the latter two, but it has never been operationised, meaning that their citizens might face double taxation.

For the first time in an IPO, dealers who have worked so hard to sustain one of the most phenomenal growth by a company worldwide, will get a piece of the action with Sh1 billion worth of shares reserved for them.

Others on the gravy train are Safaricom employees who take Sh2 billion worth of shares, making them in per capita terms the biggest beneficiaries of the issue.

The staff would purchase the shares under an employee share purchase scheme, where the company is thinking of allowing them to pay gradually.

However, there is a lock-in clause to prevent those leaving within a certain period from benefiting.

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About SG

Secretary general of Chama Cha Mwananchi. This blog www.chamachamwananchi.wordpress.com, is based in Sweden.

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