Kenya: Safaricom Bond Issue Raises Sh4.5 Billion

Mergers, Acquisitions and Financial Results

Safaricom has raised Sh4.5 billion it had targeted through a bond issued last month, boosting the telecommunication company's war chest for making new capital investments to safeguard its market share in a fiercely competitive industry.

Transaction advisors said the firm had just about hit its target, indicating a high appetite for investment opportunities given the high competition for funds from offers floated in December.

Treasury, Safaricom, CFC Stanbic Bank, and power firm KPLC all sought to raise an estimated Sh31 billion through bond and rights issue offers last month.

"We received just about the amount we were seeking," said Nkoregamba Mwebesa, the managing director of CFC Stanbic Financial Services who were lead arrangers of the issue.

Subscription results of the Sh2.5 billion medium term note issued by CFC Stanbic Bank are yet to be announced. This was the second tranche of a three-note bond that originally opened in 2009 targeting to raise Sh12 billion. The first issue dated November 2009 was oversubscribed.

The offer sought to raise Sh5 billion, but received applications worth Sh7.5 billion, which the company took up fully by exercising the "green shoe option."

"The second issue did not attract as many applications mainly due to its timing but it was successful still," said Kabaki Wamwea, an executive director at Dyer and Blair Investment Bank.

The second half of last year saw heightened fund raising in the capital markets including a KCB Bank rights issue and a Housing Finance corporate bond. The first tranche paid an interest rate of 12.25 per cent, while the second note will be paying less than seven per cent.

A vicious price war started by Safaricom's main rival Airtel on calling tariffs have put pressure on the firm's dominance as the largest mobile phone service provider. The fluid telephony market has seen the share of Safaricom trade at below the initial offer price of Sh5 for most of the time since the global financial crisis. The government's two-and fifteen-year bonds also issued last month were oversubscribed, netting Sh24.3 billion, but Treasury took up Sh15.2 billion.