Safaricom Issues U.S.$66 Million Corporate Bond in Kenya

Mergers, Acquisitions and Financial Results

Kenya's largest telecoms firm, Safaricom announced a $66.6 million (KSh5 billion) bond to the Kenyan market, part of an extensive capital-raising initiative the company is implementing.

The release of the medium term notes follows the approval of Safaricom's $160 million (KSh12 billion) bond programme by Kenya's Capital Markets Authority (CMA). The $66.6 million represents the first tranche.

The process ends an 11-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.

According to the issue documents, the offer closes on October 29, while the allocation will be a day later. The notes have been divided into two options: one with a fixed rate and the other with a floating rate.

The fixed rate notes will carry a coupon rate of 12.25% per year, while the floating rate notes' pricing will be pegged at 185 basis points above the most recent published rate for the 182-day Treasury Bill.

"We are extremely bullish about this bond. The conditions and pricing are right and we are confident the market will endorse our overall strategy by taking it up. Safaricom will be using the funding for general corporate capital purposes, including the rollout of some critical projects," said Safaricom CEO Michael Joseph.

The issue has been put together by Barclays Bank of Kenya Limited and Barclays Financial Services Limited in association with Absa Capital, a division of Absa Bank Limited; CFC Stanbic Bank and CFC Stanbic Financial Services as arrangers. The joint sponsoring stockbrokers are CFC Stanbic Financial Services and Kestrel Capital (East Africa) Limited.

The reporting accountants on the issue is PricewaterhouseCoopers, while the transaction's legal counsel is Kaplan & Stratton. Legal counsel to Safaricom on the programme is being provided by Daly & Figgis, the fiscal and calculation agent is CFC Stanbic Bank, while the registrar is Livingstone Registrars.

With the issue of the $66.6 million (KSh5 billion) medium term notes, Safaricom will be further entrenching a long-standing relationship with the Kenyan corporate bond market. In 2001, the listed telecoms operator launched a bond for $53.3 (KSh4 billion), the principal for which was repaid between September 2003 and March 2006.

Formed at the turn of the decade as part of the liberalization of Kenya's telecoms sector as a joint venture between global GSM leader Vodafone of the UK and the government of Kenya, Safaricom has firmly established its credentials as a regional leader, spawning a virtual telecoms revolution in Kenya. With a gross profit Sh15 billion and revenue totalling $200 million (KSh70 billion) during its last financial year, Safaricom is the region's most profitable company. Last year, it successfully listed on the Nairobi Stock Exchange through a landmark initial public offering (IPO) and actively trades on the commercials counter. Growing from its cradle in mobile voice services, Safaricom has evolved into a total telecoms company.

The firm, which has a subscriber base of over 14 million, offers all telecoms services under one roof: mobile and fixed voice and data services on a variety of platforms: Kenya's widest 3G network; a growing fibre optic cable footprint and WIMAX technology.

East African Business Week