Safaricom share price to rise

September 2, 2010
Shares

, NAIROBI, Kenya, Sep 2- Safaricom has blamed the dipping of its share price at the Nairobi Stock Exchange (NSE) on the overreaction of the market to the fierce price wars that have been witnessed in the sector in the last two weeks.

Outgoing Chief Executive Officer Michael Joseph said at the current rate of Sh4.80, the price is not a true reflection of the fundamentals of the company.

“We are concerned about the share price because we believe that the market has overreacted to what has been going on in the market,” he said.

Safaricom’s share price has continued to fall since Zain Kenya launched an onslaught by slashing its call tariffs to Sh3 per minute to reflect a cut in the termination rate.

Before the price cut by Zain and the subsequent revisions by other operators, the share price ranged around Sh5.80 and at one point even touched a high of Sh6. On Thursday, the share value remained unchanged at Sh4.80.

Sold at an opening price of Sh5 during the firm’s Initial Public Offering in 2008, the share attracted hundreds of thousands of investors who had hoped to cash in on the rally that was witnessed with the KenGen share whose value rose by over 300 percent, a few weeks after it started trading.

However with the continued dip, most of the over 780,000 shareholders are expected to continue dumping their shares which might further affect its performance.

At the company’s second Annual General Meeting since its listing, Mr Joseph was however optimistic that once the situation normalises and mobile phone operators tone down on their revision of their calling rates, the share would start appreciating.

And while taking into account that foreign investors play a significant role in determining the direction of the share price, the CEO disclosed that they planned several international road shows to promote their investments prospects in Safaricom.

Mr Joseph also sought to reassure customers and shareholders that the provider was well prepared to take on competition and ensure that it retains its position as a market leader.

The entry of Bharti Airtel (the new owners of Zain Kenya) into the market was expected, he said, adding that they had put in place a number of strategies to counter any move made by its rival.

Despite what he termed as ‘unethical tactics’ that were being employed by Zain, he reiterated Safaricom’s intent to protect its market position through offering quality services and products.

This, he explained to the shareholders entails investing massively in infrastructure upgrading which would eat into the shareholders’ dividends.

Some of the 1,055 shareholders in attendance had complained about the Sh0.20 dividend payout that the board had proposed saying it was too little.

Mr Joseph however told them that while it is still committed to ensuring a good return to its shareholders, it has to put in place measures such as retained earnings that would guarantee shareholder value in the long term.

The company’s chairman Nicholas Ng’ang’a added that part of the reason the dividend payout was so little was because of the huge shareholder base which has seen many of the nearly 40 billion shares in the hands of the small shareholders.

This has prompted the company to look into ways of reducing the shares in the market in form of a (share) consolidation which would eventually enable them to pay a ‘reasonable’ dividend.

The company however reported that is yet to receive the requisite regulatory approvals as it has requested for the amendment of some of the Capital Markets rules.

During the meeting, whose turnout was low following the introduction of a ‘no frills’ policy, the shareholders approved the dividend payout and also passed other resolutions.
 

Shares

Latest Articles

Stock Market

Most Viewed