Kenya competition laws worrying

July 6, 2010

, NAIROBI, Kenya Jul 6 – Foreign investors have reportedly reacted negatively to the recent government measures to regulate the telecommunications sector.

Safaricom Chief Investor Relationship Manager Les Baillie said on Tuesday that recent controversial regulations around dominance and competition are worrying to investors as they see it could curtail the company’s growth.

Mr Baillie said investors were now adopting a wait-and-see approach towards Safaricom shares as they wait for amendment of the regulations.

“What we got from foreign investors is that the dominance clause was directed at Safaricom trying to slow down growth which is of concern to them,” Mr Baillie said.

The Ministry of Information and Communication introduced the Information and Communication Regulations, 2010 with clauses touching on fair competition and equity of treatment, which Safaricom took issue with.

The government has since said it would review the regulations.

Safaricom has been conducting a number of international investor road shows and this has seen a significant shift in the shareholding structure of Safaricom with more foreign investors coming in.

Since May 2009, foreign corporates have steadily increased their stake by 8.35 percent to 21.54 percent as at May 2010.

The shareholding of local corporates and local individuals has declined by 0.99 percent and 7.15 percent respectively within the same period to 77.54 percent collectively compared to 85.68 percent a year ago.

In line with the demand trend for Safaricom shares over the past one year, foreign corporate investors have significantly improved the number of shares they hold (63.34 percent increase) after absorbing the shares made available from the reduction in holdings by the other classes of shareholders.

“Foreign investors like the Safaricom story but have their concerns over what is going on in the country,” Mr Baillie said.

The entry of Indian telecom giant Bharti Airtel into the market with the acquisition of Zain Africa assets has also sent jitters to the foreign investors. They have expressed concern that Bharti’s entry could eat into Safaricom’s current market share given its success in India.

Mr Baillie is however confident that investors will stick by Safaricom given its resilience in the market continuously posting positive results.

“They do not see it as a major concern whereby they would be looking at selling their shares. Having strong competition is good for everybody because it keeps us on our toes and makes us concentrate on our bottom line to provide returns for shareholders,” he said.

At the same time, Safaricom says it will hold its 2nd Annual General Meeting on September 2 at the Bomas of Kenya.

Mr Baillie said the company will have a lean AGM as it did last year.

“As witnessed by the past financial year’s results, the cost savings made from holding a no-frills AGM will be ploughed back into the business to provide our shareholders with a bigger return,” he said.

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