MERGERS, ACQUISITIONS AND FINANCIAL RESULTS

Kenya’s Safaricom bond opens to seek first Sh5bn

Safaricom’s Sh12 billion bond has open following the approval from financial regulators. It announced that it will be seeking an initial Sh5 billion at a price to be announced later. The process ends an eleven-month hunt for funding by the mobile firm, which initially indicated that it was searching for cash to fuel its expansion plans in December last year.

The mobile firm’s capital expenditure is expected to remain relatively high over the next few years, which is consistent with the strategy of expanding the GSM coverage footprint in rural areas as it increases capacity levels in key urban areas. “This money will mostly be used to facilitate the expansion of our emerging data business,” said Peter Arina, Safaricom chief commercial officer, in a previous interview.

Medium term notes typically range in maturity from one to 10 years and give investors an idea of what their maturity will be when they compare its price to that of other fixed-income securities. Companies typically turn to these kind of facilities so they can access constant cash flows from the debt issuance. These notes also allow a company to tailor its debt issuance to meet its immediate financing needs.

Safaricom CEO Michael Joseph has indicated that his firm was keen to use at least Sh2 billion on infrastructure development and capital expenditure immediately. It is not the first time that telecoms firms have turned to the markets to secure funds to fuel their capital expenditure. This will be Safaricom’s second public bond issuance since 2001 when it went to market to source Sh4 billion. At the time, the bond was 100 per cent over-subscribed, and was the largest corporate deal of its kind in either the capital or bond markets. In 2005, Safaricom’s competitor Zain successfully issued a five-year bond for Sh4.5 billion which, was also oversubscribed by 100 per cent.

The successful completion of this bond offering will bring Safaricom’s total funding from the Kenyan debt markets to Sh20 billion. The latest deal also represents the Safaricom’s third capital markets offering, establishing the company as an active participant in the domestic market.

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