Kenya analysts discuss Safaricom transition

July 23, 2010
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, NAIROBI, Kenya, Jul 22 – Safaricom’s announcement on Thursday that its long serving Chief Executive Officer (CEO) Michael Joseph would retire in November is not likely to impact negatively in the company’s share price, analysts said on Friday.

Some of those interviewed by Capital Business said that Mr Joseph’s exit has been expected for several months now since his contract which expired last year was only extended for one year.

“I believe there should be no significant impact on the business mainly because the new CEO (Bob Collymore) has been part of the Kenyan business for the last year, so its expected to be business as usual,” said African Alliance Research Investment Analyst Francis Mwangi.

Standard Investment Bank Executive Director Job Kihumba said the retention of Mr Joseph in the board for the next two years was likely to see the company adopt more or less the same strategies and therefore no major changes should be expected.

The two experts however pointed out that this change is in line with corporate governance rules and hence argued that long term investors should be more receptive to it.

“Michael Joseph has done an excellent job at Safaricom. He had his entry, he did a grand job and now his exit is imminent. Unless there is a major disruption in the way business is done at the firm, there should be no much change,” Mr Kihumba said.

He advised that this transition strategy should be adopted by many companies in Kenya which would see a top manager exit after their stint and leave the position for someone else to take over.

“Kenyans should be encouraged to see things from that perspective. That once you have done a good job it’s time to go and leave others to continue. This is because after doing a good job, there isn’t much else you can add but someone else coming in may be able to do better,” he added.

Research Analysts at Kestrel Capital concurred with Mr Kihumba but pointed out that some investors have expressed concerns about how Safaricom is likely to fare under the leadership of Mr Collymore.

“Michael Joseph started Safaricom from scratch to where it is now. But leadership plays a crucial role in a company so people’s concerns are; will Collymore drive the company with the same strategy? Will he also deliver as the shareholders expect? That’s a major concern,” said analyst Vimal Parmar.

By mid-morning’s trading at the Nairobi Stock Exchange, supply for Safaricom shares was higher than the demand although the price is expected to be steady over the coming weeks since the counter is also very liquid.

The share closed at Sh5.65 on Friday down from Sh5.70 registered on Thursday.

Of major concern to the incoming boss and the board will be how Safaricom positions itself to ward off competition from the new owners of Zain, Bharti Airtel, that have pledged to target the mass market just like their competitor.

The analysts said they would only be able to tell whether investors have gained confidence in Mr Collymore once Safaricom releases its full year results in March next year.

Another analyst at Kestrel, Masinde Wycliffe, reckoned that the fact that Mr Joseph will be in the board and offer guidance on some key issues should also serve to render confidence to investors at least in the next two years before market dynamics due to increased competition begin to change.

He added that the timing of the CEO’s exit at a time when Safaricom’s rivals were preparing to roll out their 3G and 4G technology was inconsequential.

“Safaricom has fought so many battles and there will be more coming so in terms of timing we cannot say its the right time for him to go or say. In the telecoms industry, you cannot predict the future with certainty,” Mr Masinde added.
 

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