Companies

Safaricom bosses get Sh700m free shares

SCOM

Safaricom headquarters on Nairobi’s Waiyaki Way. PHOTO | DIANA NGILA

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Summary

  • Senior Safaricom managers were awarded 16.4 million shares with a current market value of Sh700 million for free in the year ended March as compensation for their past performance.
  • The employees had cashed out 17.8 million units of stock worth Sh763 million the year before, with the company’s cumulative spending on the share-based compensation scheme standing at more than Sh3.5 billion.

Senior Safaricom #ticker:SCOM managers were awarded 16.4 million shares with a current market value of Sh700 million for free in the year ended March as compensation for their past performance.

The employees had cashed out 17.8 million units of stock worth Sh763 million the year before, with the company’s cumulative spending on the share-based compensation scheme standing at more than Sh3.5 billion.

The Nairobi Securities Exchange-listed firm buys its own shares in the open market and allocates them to specific employees who eventually take ownership three years later when they are free to sell the stocks or continue holding them in their personal accounts.

“Additionally, 16.42 million shares historically valued at Sh480.7 million (2020: 17.83 million shares valued at 438.6 million) vested and were exercised by eligible staff,” the telco says in its latest annual report.

The free shares and Safaricom’s long-term stock price rally have made the company’s stock-based compensation one of the most lucrative among Nairobi Securities Exchange-listed firms.

Safaricom has focused on giving high-scoring managers shares at no cost after closing a separate scheme where a more diverse group of employees were offered an opportunity to buy shares at a fixed price of Sh5.4 each.

Unlike other employee share ownership plans (Esops), Safaricom’s has not diluted investors since the stocks are bought from the existing pool in the open market.

Safaricom says it bought 14.9 million shares at a cost of Sh440.2 million in the year ended March as it prepares to award qualifying employees in the near future. The telco, through a trust, now holds 15.43 million shares which it bought at a cost of Sh446.2 million.

The shares will be given to senior executives for free as part of their compensation for meeting or exceeding set performance targets.

The company’s chief executive and chief financial officer have traditionally taken most of the stock-based compensation.

The current officeholders, Peter Ndegwa (CEO) and Dilip Pal (CFO), were not among those who were awarded shares in the review period, having joined the company recently.

Mr Ndegwa was appointed on April 1, 2020 while Mr Pal took office on November 1, 2020.

The telco’s stock is currently trading at record highs of Sh42.8, driven by investors’ expectation of increased profitability and future growth from the company’s new Ethiopia entry.

The mobile money platform M-Pesa, Safaricom’s most important business, generated more revenue in the three months ended June according to disclosures from the telco’s parent company Vodacom Group.

“The performance was supported by M-Pesa revenue growth, up 43.2 percent on a normalised basis, which benefited from the increased customer base, higher platform usage and the re-instatement of person-to-person M-Pesa transaction fees,” Vodacom said.