Safaricom eyes debt market for Sh12b

March 19, 2009
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, NAIROBI, Kenya, Mar 19 – Mobile phone service provider Safaricom has disclosed that it will in the next few days release a structure on how it intends to raise between Sh5 and Sh12 billion from the debt capital market.

Safaricom Chief Finance Officer (CFO) Chris Tiffin said on Thursday that they were considering borrowing the money either through a syndicate loan or a corporate bond.

“Companies all over the world are struggling as the liquidity is a little bit tight right now no matter where one is looking; so it will be a positive thing for us if we can raise this money from the market,” he said of the funds that would be raised in phases and which will be used to upgrade their infrastructure.

The CFO however hinted that the firm would most likely issue a corporate bond citing the appetite for long term debt instruments that has recently been exhibited by investors.

“Tight liquidity does put a lot of pressure on pricing and margins that have been offered by institutional banks and on the other side you have the bond market which is relatively untapped,” he added.

Raising funds through the bond is increasingly receiving approval from the market after the success of the government’s infrastructure bond which was 45 percent oversubscribed.

Although he declined to divulge further details, Mr Tiffin said they have identified the consortium of local companies that would assist them in the transaction.

He spoke during a media briefing where Chief Investor Relations Officer Les Baillie admitted that Safaricom’s market share has declined from 81 to 77 percent owing to the entry of two new players in recent months.

He also sought to assure that the Safaricom shareholder base was stable despite the poor performance of their share at the Nairobi Stock Exchange (NSE).

Contrary to reports that there was a mass exodus from the shares, he said only 13 million shareholders had liquidated since the Initial Public Offer in June last year. The company had 842 million shareholders as at June 2008 and 829 million last month.

He maintained that the movement in the price movement was not an indicator of the company fundamentals adding that the share, which on Thursday traded at an average of Sh3.05, is under valued.

“We have seen a recovery over the last one and a half weeks and the stockbrokers that I have talked to are of the opinion that the share price has started to bottom out and they expect to see some upwards movement on it,” he stated.

Mr Tiffin added that going forward, the company was re-looking at its cost structure in order to protect its profit margins and ensure high returns to their shareholders.

Asked to confirm whether the company had fired some of its middle or senior management, CEO Michael Joseph declined to comment but said the management structure would continue to change as they seek to position themselves as the larger and better operator in the market.

Mr Joseph said although they would not lay off any of their staff due to the challenging economic environment, they plan to recruit about 400 new staff this year.

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