Analysts have raised concerns over the valuation method used to determine the Sh34 per share price at which the government is selling a 15 percent stake in Safaricom to South Africa's Vodacom Group Limited, warning the deal could be undervalued.
They further warn that the transaction will give the multinational a controlling 55 percent stake in what could limit the government's influence in the telco's strategic direction.
The Institute of Certified Public Accountants of Kenya (ICPAK) said that basing the transaction price primarily on a 33.9 percent premium to the trading price of Safaricom’s shares in the 180 days before Vodacom filed its buyout disclosure relies on historical market data and liquidity conditions rather than Safaricom’s intrinsic value.
"There is a need to link the proposed premium to Safaricom’s expected future earnings, sector outlook, and relevant macroeconomic trends, rather than relying solely on historical trading metrics," Professor Elizabeth Kalunda, the ICPAK chairperson said.
"This will enhance clarity of the valuation methodology and strengthen public trust in Kenya’s Capital Markets."
Prof Kalunda said the market premium approach may not fully capture the company’s long-term growth prospects, future cash flow potential, or strategic importance to the State.
The submissions were made before the National Assembly's joint committee on Finance and National Planning and Public Debt and Privatisation.
The deal, in which the Treasury is selling a 15 percent stake in Safaricom to Vodacom for Sh204.3 billion, needs to be approved by Parliament among other entities. If it is concluded, the government will retain a 20 percent interest in the telco.
The ICPAK's concerns came even as regulators led by the Communications Authority of Kenya (CA), the Capital Markets Authority (CMA), and the Competition Authority of (CAK) welcomed the deal, telling lawmakers that the price was competitive and the transaction is unlikely to negatively affect the market.
"The preliminary position of the Authority (CA) is that the request for the proposed change in shareholding can be accomodated considering that: there is no local shareholding threshold requirement under policy, the transaction retains local equity participation through the government of Kenya, and the transaction has been approved by the Cabinet," David Mugonyi, the CA's Director General said.
ICPAK and the Technology Service Providers Association of Kenya, an industry association, meanwhile say the buyout price of Sh34 per share was set without a publicly disclosed methodology.
"Independent benchmarking or third-party validation is minimal. The proposed price of Sh34 per share has not been accompanied by a clear explanation of the valuation methodology, raising concerns over price discovery and accountability," Prof Kalunda said.
"The proposed price of Sh34 per share has not been accompanied by a clear explanation of its methodology, raising concerns over price discovery and accountability."
