Category Archives: Safaricom

Urban Inflation Index: December 2008

Four months ago last review (should be a quarterly exercise going forward) . 2008 has been a year with high prices and cost of living factors in the news. From the post-election violence in January to the (then) world oil prices, the pinch has been felt in Kenya.

The Government has come under pressure, but without addressing of its own excesses (procurement, new offices & limousines, parliemantarians, councilors and judges who refuse to pay income tax), has likewise tried to run the screw on the corporate sector – resulting in efforts to reduce the price of petrol and now maize flour (staple food)

Gotten more expensive

Staple food: Maize flour which is used to make Ugali, that is eaten by a majority of Kenyans daily. A 2 kg. Unga pack at Uchumi today costs Kshs. 97 which is 1/3 more than the Kshs. 73 four months ago. Farming woes continue, the crop this year is bad and Unga who said that they ran out of flour, among other revelations at their AGM, also stated that the maize harvest in 2009 will be worse and high prices will continue. There have been allegations of dodgy imports and the Government is today trying to arm-twist the price of Unga down to Kshs. 55 (EDIT – the Government announced today that maize will cost Kshs. 72 in urban areas and Kshs. 52 in rural areas)
Other food item: Sugar (2 kg. Mumias pack) is at Kshs. 160, up from Kshs. 145 three months ago. For Mumias customers and shareholders, the price is even lower for other unbranded sugar(s) on shelves.

Foreign Exchange: 1 US$ equals Kshs. 79.08, (18% weaker) than the Kshs. 67.4 four months go. This is partly the strengthening of the dollar, partly outflows from Kenya (at the NSE) – and comes after the shilling (while strong) had cushioned some impact of high oil prices.

Gotten cheaper

Fuel: Litre of petrol fuel (at local petrol station) is now Kshs. 92.7 (~$5.40 gallon) which is about 10% cheaper than the Kshs. 101.50 seen last time. While that is still higher than it was at the beginning of the year, and oil prices are down over 60% from the record highs of mid-2008, it is remarkable that for once fuel prices have reduced. In the past they have merely stagnated and oil companies, not passed on savings to consumers, but the threat of the government to regulate the prices, and a sustained media campaign (web/radio) has resulted in a slight reduction in petrol prices. (EDIT – A leading oil marketer – Shell announced today that prices will drop by Kshs. 15)

Entertainment: Bottle of Tusker beer (at local pub) is Kshs. 120 down from Kshs. 130 (cheaper by 8% from four months ago). Don’t know if this is one pub decision or the competition from new Summit beet launched by Keroche in October 2008 – the first true local competitor since (South African) Castle folded shop about six years ago. How will EABL fight back, and do they have to? Keroche got off to a good start but there has been little post launch marketing.

Communications: Continues to get cheaper as two mobile phone companies have become operational in the last quarter of the year – Orange (France Telkom) and Yu (Essar/Econet). The tone was set by Zain’s successful Vuka tariff, priced at Kshs. 8 per minute to call any network. Market leader Safaricom responded with Jibambie (up to a 63% discount) which enabled their subscribers to make calls at prices ranging from Kshs. 8 down to Kshs. 3 per minute if they bought a bigger denomination airtime voucher. The battle for subscribers is shifting now from voice calls which have reached unprecedented lows to data and money transfer where Safaricom is effectively Kenya’s largest ISP and money wallet.

No change: Electricity: My November KPLC bill is still Kshs. 1,900, same as it was in August, with a fuel surcharge reduction yet to be effected. High electricity prices have been a major cause for concern among Kenyan companies leading to President Kibaki to call for a reduction in the taxes levied on petrol prices and electricity.

But: Related: Is the quality of official statistics inflation data in question?
EDIT – Challenged by inflation, but with a view to improving liquidity, the Central Bank of Kenya today lowered the CBR rate (implied base rate) from 9 to 8.5% and also lowered the bank minimum cash ratio from 6 % to 5%

Reassurance from bankers

The downward trend continued at the stock exchange again this week to Friday. So how about some banking news to reassure nervous investors?

KCB: are first out of the blocks with their third quarter results. Some shareholders might be peeved about having forked over Kshs. 25 a share in the rights issue a few months ago, only to have the share trading at below 20 this week.

How have they performed? Compared to a year ago, assets are up 67% and profit up 66% – which should go on through Q4 of the year, and hopefully the bank will reward patient shareholders with 2/3 increase (or more) in dividends after December. After three quarters, the bank has already passed their full year income mark for 2007, and aggressively loans are up over 50% against just 15% increase in deposits.

Equity: are usually one of the first banks to publish quarterly results, and have been known to run them in the Saturday newspapers, so we’ll see by Monday.

Co-Op: a week to the IPO and the media push is on, though subdued compared to past NSE offers. There’s a pre-prospectus document (PDF) at their site published a few weeks ago. See also analyst Robert Bunyi’s perspectives on the IPO (Hat tip Ratio Magazine)

Safaricom (M-PESA qualifies as a bank!) CEO Michael Joseph does his part to reassure retail investors about their Safaricom share prospects going forward. and regardless of their current price.

Opportunities

most from the Daily Nation
– East African Cables commercial manager hr@eacables.com 13/11
– Econet credit manager see www.Adeptsys.biz by 31/10
– Government of Kenya (Ministry of public service): 112 senior personal secretaries, 126 personals secretaries. D/L is 31/10 to the PS by snail mail
– KCB: head of alternative business channels, manager – trustee services & compliance. 7/11
– KPMG: seeking several public sector & development associates (PSA01/08) apply through talentrecruit@kpmg.co.ke D/L 7/11
– Suntra investment bank: Chief executive (SIB-CEO/10.08) apply through esd@deloitte.co.ke D/L 12/11

from The Economist
– African Agricultural Technology Foundation: Executive Director Nairobi, Kenya
– IUCN: Regional Director for Eastern and Southern Africa Nairobi, Kenya
– KickStart International, Inc: Development Economist / Director of Impact Evaluation & Monitoring Nairobi, Kenya
– Africa Center for Strategic Studies: Associate Dean, Relations Professor Washington, DC
– eRwanda PROJECT: Lead Technical Manager for RCIP-Rwanda Kigali, Rwanda
– Africa University: Vice Chancellor Mutare, Zimbabwe
– Alliance for a Green Africa: Senior Policy Officer, Innovative Financing for Agriculture Nairobi, Kenya
– SNV: Senior Advisor Water, Sanitation and Hygiene -Nanyuki, Kenya
– Call for Paper – First Congress of African Economists

from the mailbox
Free Web, Domain and Blog Hosting in Kenya‏: read more but buyer beware

Safaricom 3s

Tracking the storm at 7, 6, 5, 4 and now Safaricom at Kshs. 3.70

Mobile notes
– Communications is perhaps the only significant sector that has gotten cheaper this year. Oh yeah also NSE shares are much cheaper this year
– Safaricom is fundamentally sound and performance on the stock market should not translate to the business side
– But Safaricom now has new competition from Zain, Orange and Econet with new offers that may cannibalize each other. Safaricom can’t possibly respond to each marketing overture from the newbies
– Competition will drive increase of (cheap) phone sales as subscribers add second and third phones e.g. Safcom for M-Pesa and Internet, Zain for cheap calls, and Orange for cheap SMS and even cheaper calls
– Safaricom ironically got nominated by Africa Investor Investment Awards for Privatization Deal of the Year ; other Kenyan companies nominated include Alliance for a Green Revolution in Africa (AGRA), the Ministry of Finance Kenya (for Credit Reference Bureau Regulations – relay? Are they original?) Kenya Commercial Bank, PricewaterhouseCoopers, Dyer & Blair, Morgan Stanley (for Safaricom IPO?), East African Development Bank (actually Uganda based), East African Breweries Kenya (for Best Employer), Evelyn Mungai (for Businesswoman, not TI Kenya), Mumias Sugar Company and KenGen (for Carbon Finance)

Bad News Bears

Correction Window: At the beginning of the month it was Crown Berger shares that did a swan dance on some pedestrian financial results and last week it was the turn for Portland cement (EAPC) shares to take a drastic dip in value with the announcement of reduced profits.

This has generally been a tough year for manufacturing stocks and the next few days should see year end results of both Kengen and KPLC who have been battling over tariffs and leaving consumers suffering and manufacturing companies & industries threatening to shut down or decamp owing to high electrical costs.

There are some shares on the NSE that are perceived to be under-valued and some that are over-valued (don’t pay dividends, appreciate on speculation, limited trading activity) – and the announcement of financial results (with the waiver of the 10% daily share price rule) gives the market the chance to correct/adjust share prices. But will these share drop? Do they have any reason to? Their P/E ratios are already so low.

Already Safaricom CEO Michael Joseph has said that the price dip of Safaricom shares have no impact on the company’s performance (their quarterly results will also be tricking in soon)

Spotlight on foreign investors

after Morgan Stanley & Safaricom

Rift Valley Railways: This week as the patience of the governments of Kenya and Uganda reached new highs, local stakeholders finally got rid of the managing director. More stories are now coming out on the (lack of) financial strength of the backers of the railway. The East African newspaper has (consistently) had the best coverage of the railway management over the last two years.

About a year ago, the former MD gave a talk on the difficulties he faced in reviving the railway and the way forward for the 25 year program.

Tiomin is another ‘foreign investor’ who never had financing that was sufficient enough for them to launch their operations in Kwale, even after the government and the courts gave them go ahead

Zain is the new brand of the former Celtel Group that is expanding all over Africa. But according to their group financial results for the half year, Kenya is the only African country where they did not gain subscribers over the last year. At June ’08, Kenya had 1.9 million subscribers compared to 2.4 million in June 2007. Compare that to Uganda 1.8m (up 100%) and Tanzania 2.8m (up 48%). Half year revenue and loss was $79.4 million and $26.4m compared to %100m and a loss of $4.2 million at the same point in 2007 Safaricom is blamed for defending their market turf

Google have bought into Mobile Planet a leading local provider of value added mobile services (and also a Safaricom partner).