Category Archives: Safaricom IPO

MTN Ghana IPO

EDIT September 5 2018 MTN Ghana shares listed on September 5.  Bloomberg reports that Africa’s largest mobile-phone company sold 1.5 billion shares in its Ghana unit at 75 pesewas each, a large addition to potential volumes on a market where 323 million shares were traded in the whole of 2017, according to data from the bourse. Of the 128,152 new shareholders who bought stock in MTN Ghana, 127,653 are retail investors. The exchange had 976,068 investors in equity and debt securities last year. On Wednesday, the stock closed unchanged after more than 5 million shares were traded.

Original June 4: MTN Ghana the leading Telco in that country has just launched an IPO as part of a requirement for obtaining a 4G license in 2015 and which has resulted in the offer of 35% ownership in the company to Ghanaian investors and with the shares listed thereafter.

MTN Ghana: It is the largest telco company in Ghana with 17.8 million subscribers, and with an estimated 47% market share and 12 million data customers. MTN Ghana had 2017 revenue of  GHS 3.42 billion (about $728 million) and a net profit of GHS 715 million ($152 million). They target is to pay put 60% of profit as dividends. It is part of the MTN Group that has 217 million customers across 22 Africa and the Middle East countries such as Uganda, South Sudan South Africa Sudan (not Kenya but for a corporate business unit), and it is the largest telco in 14 of these countries.

Looking at the IPO documents in an A to Z format:  

Ghana:  Ghana is the second biggest economy in West Africa. It has a population of 28 million, and a recent average economic growth rate of 7.0% per year. Ghana has a mobile penetration of 130% (38 million customers), and besides MTN, other companies are Airtel, Tigo, Vodafone and Glo.

GSE: The MTN Ghana shares, which will trade as MTNGH, will be listed on the Ghana stock exchange, which operates three markets including a main market with 34 listed equities, an alternative market and a fixed income market.

IPO Applications: Ghanaians can subscribe for the new shares through MTN USSD app, online, or at MTN branches. Payment options are by cash, cheque, MTN money, bank transfers and (Visa & MasterCard) debit cards, while payment by credit cards and postal orders are not allowed. Customers (who are clients of IC Securities) will also be able to trade/sell their share by USSD on the phone app

Mobile Money: 11.6 million customers use it to do a variety of things including money transfers (they have 90,000 agents/merchants), buy airtime, bill payments, bulk payments, pay fees to schools on the platform, save (and invest), “TBill4All” (partnership with Ecobank Ghana enables buying of treasury bills), “Y’ello” save (partnerships with Fidelity Bank for savings), international remittance, send money to bank accounts, buy “mi-life” insurance and do ATM cash-outs at machines at 8 of the 17 banks that MTN partners with. “MoMo” has also used for payment in the Google store since December 2017.

Shareholding changes: Ahead of the IPO, MTN Group owns 97.65% and a company called Zent 2.35%; after the IPO it is envisioned that MTN Group will have 63%, Zent 1.91% and new investors 35%. The minimum target to be deemed a success is 10% i.e uptake of 0.35 billion GHS ($75 million) – and allocation to non-Ghanaians will be limited to 5% of the issues shares

Taxes: MTN Ghana pays about 3% of Ghana government tax revenue and supports 500,000 jobs through its ecosystem of suppliers. It paid 1.1 billion cedis ($225 million) in 2017 as income tax, communication fees, withholding, customs duties, PAYE and other taxes.

Threats: The document cites threats to MTN Ghana growth plans including; battery theft (from cell sites), fibre cuts (average 3 per day on their 5,000 kilometre nationwide fibre network), SImbox fraud, load shedding (electricity power shortages), OTT calls and competition from other Telco’s.

 Timelines: The IPO runs for nine weeks from 29 May to 31 July 2018. There will be regional sideshows for two weeks in June, and allotment and listing are planned for on 5 September 2018. If there is an oversubscription, refunds will be from August 8.

Transaction advisors: The sponsoring stockbroker is IC securities, and receiving agents are all stockbrokers and receiving banks are almost about 20 Ghanaian banks – such as Access, Ecobank, Barclays, UBA, FBN, GT Bank, Societe Generale, Standard Chartered, Stanbic, Zenith, FBN, GN, and Fidelity.

Valuation: They are offering 4.63 billion shares at GHS 0.75 per share (about $0.16 or Kenya 16.1 per share ) and MTN Ghana can employees get a 10% discount. The offer documents by MTN Ghana compared its implied value from the IPO of about $2.2 billion (GHS 10 billion) to other peer Telco’s including MTN Group (South Africa) $18.6 billion, Bharti Airtel (India) $26.2 billion), Etisalat (UAE) $40.5 billion), Safaricom (Kenya) $11.5 billion), Itissalat Al-Maghrib (Morocco) $14.3 billion, Sonatel (Senegal) $4.0 billion, and Vodacom Group (SA) $22.6 billion) .

Safaricom Governance Changes

Appearing in today’s newspaper was a notice for the Safaricom shareholders annual general meeting (AGM) that will take place on September 1. In addition to the usual shareholder resolutions, there are additional matters that will be approved, mainly relating to governance by at Safaricom. This all follows the buyout of UK’s Vodafone stake in Safaricom, by South African Vodacom in an internal Vodafone group corporate realignment earlier this year that has now been completed.  A running theme seems to be entrench Kenyan citizens in the governance and influence at what is now Kenya’s most valuable company.

Some of the changes:

  • The company Chairman shall be a Kenyan (this is now going to be mandatory and is spelled out in the company’s articles of association)
  • Directors shall encourage retention of a “Kenyan character” in the senior management and executive committees of Safaricom.
  • The articles are also changed to spell out that that independent non-executive directors of Safaricom, shall all be Kenyan citizens.
  • The position of Deputy Chairman is eliminated.
  • Directors appointed by Vodafone shall be excluded from voting on agreements relating to M-Pesa.
  • Directors appointed by Vodafone are to vote in the interest of the company (Safaricom) if its growth and investment decision clash with those of Vodafone.
  • Directors shall appoint the Managing Director Previously as indicated in documents from the Safaricom IPO, Vodafone directors had veto power over the appointment over approval of business plans, annual budgets, the appointment of the Managing Director (Chief Executive Officer) and appointment of the Financial Director (Chief Financial Officer). Now, the Safaricom articles will change to read that “75% directors must approve these provisions” including a new one of “any material change to the company brand”. Shareholders at the AGM will also approve a name change of the company to “Safaricom PLC” in compliance with Kenya’s new companies law for listed companies to be “PLC”

Safaricom Twaweza

Safaricom launched a new brand called Twaweza this weekend, at a swanky ceremony in marked contrast to past subtle changes to the logo of the company.

Director Sylvia Mulinge narrated the seventeen year history of the company from being a department at Telkom Kenya, to becoming Kenya’s largest company, with its ups (choosing to bill its customers per second for every call [which enabled it to leapfrog its competitor who billed per minute], rolling out Simu ya Jamii, 3G data, M-Pesa in 2007, and the Safaricom IPO and listing in 2008). She also listed some missteps made, such as rolling out unlimited data to customers, and slow upgrades to their network that led to infamous Friday congestion – and which then-CEO Michael Joseph attributed to “peculiar Kenyan” phone calling habits that.

Twaweza, announced by CEO Bob Collymore, signals the switch of Safaricom from being a telecommunications company to a digital lifestyle enabler for Kenyans to connect and do more with their lives using the Safaricom network and ecosystem.

Vodacom buys Vodafone Stake at Safaricom

Early this morning a surprising news story first appeared at Bloomberg about Vodacom buying shares at Safaricom. Early interpretations of the story had the Kenya government selling their entire 35% of their most valuable investment to Vodacom.

But later, the official statement from Vodafone (and Safaricom) confirmed that Vodafone was the one selling 35% of their shareholding to Vodacom. It includes a statement by Safaricom CEO, Bob Collymore that the deal “promotes the continued successful expansion of the company as well as the opportunity to drive M-PESA to other markets in the continent.”

  • Safaricom had announced another record earnings year year, last week.
  • Will there be a rebrand to Vodacom? Safari com may be constrained by operating in Kenya. Vodacom just had an IPO in Tanzania whose outcome is pending and M-Pesa has had tremendous strides in Tanzania.
  •  Former Safaricom CEO Michael Joseph resigned from the Vodafone a month ago to concentrate on his role as Kenya Airways Chairman.
  • Vodafone will remain with 5% of Safaricom – down from 39.93%.

Safaricom Exceeds Earnings Expectations, Powered by M-Pesa and Data

At their Nairobi headquarters today, Kenya communications company, Safaricom announced another record year with the release of the Safaricom 2017 results, which CEO Bob Collymore credited to a focus on customers, innovative products and improving operations.

The company reported revenue of Kshs 204 billion (~$2 billion), an increase of 15% from the year before, and an astounding EBITDA of Kshs 103 billion ($1 billion), up from 83 billion in 2016. M-Pesa growth was 33% to Kshs 55 billion as the number of active M-Pesa customers increased to 19 million – who do an average of 10 transactions a month. The number of customers also went up 12% to 28.1 million.

Later, their CFO said the results came even as customers enjoyed lower costs of voice calls, SMS and money payments. Under “M-Pesa” Kadogo, the company waived M-Pesa tariffs for payments below Kshs 100 ($1) in a push to drive financial inclusion and this led to an 88% growth in transactions in that band.

Chairman Nicholas Nganga said that “Sustaining this growth is key to the Board” as he announced that the contract of Bob Collymore had been extended for an additional two years. Collymore, in turn, said that at a time when several Kenyan companies were announcing job losses, Safaricom had added 500 new jobs during the year and would be adding another 270 mainly in customer care.

Going forward, Safaricom will be changing their earning outlook from projecting EBITDA to projecting EBIT (earnings before interest & taxes) – and for 2018 they project EBIT to be between Kshs 71 to 75 billion after capital expenditure of between Kshs 35 and 38 billion that will be spent in 2017/18.

Following the release of the Safaricom 2017 results, their shareholders will get a dividend of Kshs 0.97 per share, equal to 80% of the profit, is an increase of 27% from 2016 – excluding the one-time bonus dividend paid out last year. The payment will total Kshs 38.8 billion, and 35% of that goes to the Kenya government as the second largest shareholder after Vodafone.