Mergers, Acquisitions and Financial Results

Mobile company Safaricom has posted the biggest profit ever in East Africa - Ksh 12.77 billion ($174 million) - edging out listed company East African Breweries Ltd from the position of the biggest profit maker in the region.

The star performance is likely to impact on the negotiations going on between the government and Vodafone Plc of the UK over the impending sale of a 9 per cent government stake in the company to Vodafone.

Analysts say that the government is likely to demand more money for the shares.

Currently, the government owns 60 per cent of the company through Telkom Kenya with the remaining shares being held by Vodafone. Last year, Vodafone made an offer of $100 million for 11 per cent shares of the company.

The International Finance Corporation of the World Bank which was appointed by the government to value the company, is said to have valued 11 per cent of the company at around $165 million. But it is understood that during negotiations with Vodafone in London, both sides started the negotiations by quoting much higher figures than the IFC's valuation.

Safaricom, with a subscriber base of about 4.5 million, has derived most of its growth from airtime sales, especially the introduction of the lower denomination top-up cards. It has constantly expanded its network and presently has in excess of 880 live sites at any one time. The company plans to introduce new products, including a money transfer service which is to be known as M-Pesa.

With its market share estimated at between 65 per cent and 70 per cent - according to June figures by the market regulator, the Communications Commission of Kenya (CCK) - Safaricom continues to consolidate its position by maintaining the largest number of base stations and constantly monitoring revenue and traffic volumes.

The subscriber base has increased from 2.512 million to 3.944 million, an increase of 57 per cent over the previous year. Net connections in the year were 1.432 million, an increase of 43 per cent over the same period.

East African Standard