Kenya mobile firm ponders share merger

August 19, 2009
Shares

, NAIROBI, Kenya, Aug 19 – Mobile phone operator Safaricom has said it is looking into ways of reducing the amount of shares in circulation in the market.

Safaricom Chief Executive Officer (CEO) Michael Joseph told shareholders on Wednesday that they were looking to hire financial advisors to guide the company on how to consolidate the approximately 40 billion shares in circulation.

“We’ve requested the board to allow us to out and get proposals from different advisors as to what is the best way to handle it. We will then come to the board with the proposals but it will take some time and we obviously have to tread very carefully because it could be a costly exercise,” he said.

Mr Joseph however said that should they opt for a share consolidation, the formula would be worked out later, after the board had looked at the proposals.  Share consolidation is an exercise whereby the shares of existing shareholders are combined. For instance, in a 10 to 1 consolidation, 10,000 shares become 1,000 shares.

At the company’s first Annual General Meeting (AGM) since its listing at the Nairobi Stock Exchange, the CEO explained to the about 3,200 shareholders present that the huge number of shares in the market means that the dividend payout has to be split among all shareholders which greatly reduces the amount per share.

The company has a shareholder base of 830,000 who will each get Sh0.10 for each share held.

“With 40 billion shares, how do you pay a reasonable dividend?” he posed adding that the dividend payout accounted for 40 percent of their pre-tax profit.

During the meeting, a resolution that will see any shareholder who opts to have their dividend sent via their money transfer service M-Pesa was passed.

However, should the investors wish to withdraw their money from M-Pesa, the commission charged on the service will still apply.

“If the customer is expecting a dividend of Sh100, they will get a Sh100 in their account. It’s only when they want to withdraw that amount as cash when the commissions will apply,” he said adding that the fee is normally shared among them, the agents and the government.

The company had made provisions for 25,000 guests but only about 13 percent of those showed up in the AGM which sought to break away from the tradition of giving freebies and transport.

Although protests by a few irate shareholders threatened to mar the event, Mr Joseph downplayed the outbursts and maintained that this was a trend they would follow in the future.

“We have set a precedent and we hope other companies will follow suit,” he said of the organisation of the AGM which enabled them to save about Sh352 million.

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