Celtel Zambia: Prospectus Peek

After taking a peek at Safaricom prospectus, take a look at the Celtel Zambia one (Thanks M for mailing it in) with two weeks to go in the calendar.

January 2008, showed that cross-border diversification may not be a bad thing, even for Kenyans – and if you have the money and the chance, you should do it. Stanbic Uganda has performed quite well, though the weakening Uganda shilling eats into improved dividends.

In this IPO, retail investors from outside Zambia are not included, nor are there provisions for other country nationals except as international institutional investors. For Kenyans who take part, we are one of the countries who have double tax treaties with Zambia – hence reduced tax on dividends. However Celtel has never paid dividends as it has ploughed back all profits into operations.

Comparing mobile giants: it’s best to compare Celtel Zambia to Safaricom Kenya as they are both market leaders and backed by multinational mobile partners. Zambia is larger than Kenya, but with about 1/3 of the population (12 million) Celtel Zambia has about 1.9m customers representing 78% market share and covers 71% of the country (Cell Z and MTN are competitors). It had 2007 revenue of $252 million and an average monthly ARPU of $13 – similar to Safaricom’s (~800 shillings per month).

Beneficiaries: While the benefits of safcom went to the Kenya government, the benefits of this (sale of 20%) will go to Celtel parent. Stanbic bank are also going to do well as lead manager, distribution agents and one of the receiving banks. IFC owns 10% of the company and is expected to sell its shares after the IPO which itself costs about $5 million.

On offer: 1 billion shares on offer at 640 kwacha per share ($0.18 or Kshs. 11.50). The minimum subscription is 700 shares (about 8,000 shillings). Employees get a 20% discount on the price.

Directors: A Kenyan connection is former PS (part of 1990’s dream team) and IFC executive Mwaghazi Mwachofi on the board of Celtel. It is refreshing got see that all directors other portfolios are listed in teh prospectus and that they have to declare that they have not censured/criticized by any regulator/ authority or been involved in bankruptcy, or liquidation.

Management fees: The company pays between 3.6% and 4.8% of annual revenue to Zain/Celtel parent. Safaricom pays Vodafone 0.5% of revenue and 6% of procurement costs as what has been a sensitive issue for the company but seems to be the norm with multi-nationals.

Stock exchange not retail or liquid: Zambian exchange appears not to be very liquid – it has 9 listed companies worth $100m, and $72m worth of deals were done last year in just 6,196 trades. The listing of Celtel should improve those numbers.

12 thoughts on “Celtel Zambia: Prospectus Peek

  1. Maishinski

    Thanks for the info!

    Interesting to note, despite competition from MTN, Celtel remains the dominant player in Zambia.

    Which somehow proves my theory on possible effect of competition on Safcom’s market share..


  2. ka-investor

    Very informative post.

    what are the possibilities of Celtel Kenya listing at the NSE with their shrinking 2.3 million customer base? Celtel Kenya customer base shrunk 23% last year despite their continued expansion in Africa. May be this is the reason they are reducing their rates every day.

  3. Maishinski

    A look into the future…

    The URL below has a 2008 report (a link to PDF document on second paragraph) on the state of competition in US Mobile industry.

    Not too detailed. Has plenty of summary data for those with limited time (graphs, tables etc).


    If you are wondering whether Safcom should be held long term or short term, check out the report for a glimpse of the possible scenario in say about 2030 – i.e. if vision 2030 works out…


  4. Maishinski

    Another analysis shows that increased competition in mobile industry is counterproductive due to reliance on economies of scale. This creates a barrier to new entrants.

    Interestingly succesive wireless mergers in US reduced national operators from 6 to 4.

    Much closer to home.. Kencell and Safcom got in at the same time, Kencell focused on quality customers, whereas safcom went for volumes.

    Kencell “went under”. Proving that Volumes (not just market share) rule in the mobile industry.


  5. bankelele

    Inquirer: I was listed where? I haven’t been part of any KCCT forum

    Maishinski: we’ll see how safcom plays out; I for one intend to buy way beyond my IPO allocation. Many people have not switched to Celtel because many of theirs callees (people they call) remain on safcom

    ka-investor: they should list, I’m sure CMA/NSE would give them an exemption on the three year profitability rule. They could certainly raise $300 million from here, easily for a similar stake

    Ryan Shen-Hoover: all credit to my source M, not me

  6. tumwijuke

    Hey Banks.
    Couldn’t get a Rwandan English blogger for you who wasn’t an expat. DJK is from Burundi and he has quite a close tab on the region. He has a number of good articles that may be of interest to you. This is his blog address -http://www.africanpath.com/p_blog.cfm?blogID=49

  7. Maishinski

    I have a feeling that QIIs applied for massive amounts – considering that:

    – they pay on delivery
    – allocation is pro rata, hence applying for billions of shares increases likelihood of getting a fair chunk of the allocation.

    – Some Investment banks tricked their shareholders to write IPO cheques in their favor – increasing likelihood of massive oversubscription in the QII category.

    This time round, it might just pay off to be a retail investor!

    750,000 applicants… Hmm My prediction was 500,000 investors. Not far off the mark. At least its closer than the 2M touted by the media.

    Subscription (RETAIL CATEGORY): I still hold on to my earlier figures:

    110-130% if you factor effect of post election crisis

    or ~ 160% if investors ignore post election crisis.


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