Capital Markets

Safaricom share hits all-time high on Ethiopia bid

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Safaricom Plc CEO Peter Ndegwa during the telco's 20-year celebration at the Nairobi Serena Hotel on October 27, 2020. PHOTO | NMG

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Summary

  • A total of 11 million shares worth Sh441.7 million changed hands at a price of between Sh39 and an all-time high of Sh40.2.
  • Foreign investors were net buyers of the telco’s shares, according to a report by stockbroker AIB-AXYS Africa.
  • Besides news of the possible Ethiopia entry, some investors are also buying Safaricom’s shares in anticipation of the release of its full-year results, which will feature the declaration of a dividend.

Safaricom’s #ticker:SCOM share price closed at an all-time high of Sh39.9 on Wednesday as investors rushed to buy on news that the telecoms operator is close to securing an operating licence in Ethiopia.

This pushed the telco’s market value to nearly Sh1.6 trillion – the highest level since the company started trading on the Nairobi Securities Exchange (NSE) on June 9, 2008.

A total of 11 million shares worth Sh441.7 million changed hands at a price of between Sh39 and an all-time high of Sh40.2, bringing the average for the day to Sh39.9.

Foreign investors were net buyers of the telco’s shares, according to a report by stockbroker AIB-AXYS Africa.

The rally has taken Safaricom’s share price gain to 38.8 percent over the past 12 months, bucking the general bear run on the NSE that has been fuelled by the Covid-19 pandemic.

“The rally is mostly to do with the announcement of Ethiopia licence. Investors do think that the deal is likely to be closed because there are only two applicants to the licence,” said Faith Mwangi, an equities analyst at research firm Tellimer.

"This could be driving investor interest. The licence is going to be attractive even minus mobile money licence given that voice and SMS is a high margin business."

The Ethiopian Communications Authority (ECA) on Wednesday confirmed that a consortium led by Safaricom and another one by South Africa’s MTN Group were the only parties to make bids in the auction for two operating licences which closed on Monday.

Nine other firms, including Etisalat, Axian, Orange, Saudi Telecom Company and Telkom SA, dropped out of the race, boosting the prospects of Safaricom in the market that is seen as presenting major growth opportunities.

Most of the firms that snubbed the process cited alleged lack of transparency besides expectations by Ethiopia to raise billions of dollars which they were not ready to pay.

"Pursuant to 33 of the Tender Regulations, qualified bidders are: Global Partnership for Ethiopia (Vodafone, Vodacom, Safaricom, Sumitomo & CDC Group [and] MTN International (Mauritius) Limited," ECA said in a notice on Wednesday.

"Pursuant to Articles 34 and 35 of the Tender Regulations, this list of qualified bidders is published on the ECA and the Ministry of Finance websites and an invitation to the opening of financial offers meeting will be sent to qualified bidders."

MTN International (Mauritius) Limited is a subsidiary of Johannesburg-based MTN Group.

Safaricom on Monday warned shareholders to exercise caution when dealing in its shares in the wake of the Ethiopia bid, alerting investors to the potential positive or negative sentiment that could arise from the material information.

Besides news of the possible Ethiopia entry, some investors are also buying Safaricom’s shares in anticipation of the release of its full-year results, which will feature the declaration of a dividend.

The telco is scheduled to publish its performance for the year ended March by May 18. It paid its first interim dividend of Sh.045 per share last month and is expected to also declare a final dividend when announcing the results for the full year.

Ethiopian officials did not indicate when the bidders would be picked but a decision is expected within a month.

"The chairman of the committee thanked the participants, reminded them that financial offers are kept secured and those from qualified bidders will be opened during a future meeting," the chairman of the bid evaluation committee, Balcha Reba, said in a statement.

The fact that only two bids were made has narrowed ECA’s options and the bidding process could be reopened, especially if the financial offers fall below the government’s targets.

Safaricom’s consortium includes its parent companies Vodacom Group, Vodafone Plc, UK sovereign wealth fund CDC Group and Japanese conglomerate Sumitomo Corporation.