Mergers, Acquisitions and Financial Results

Mobile telephone operator Safaricom has signed a Ksh12billion (about US$166.6 million) loan facility to finance the company's planned expansion of its network.

Safaricom's chief executive, Michael Joseph, said the funds raised from the transaction would be invested in the network, repay all the existing borrowing including a Ksh4billion (about US$55.5 million) bond, Ksh2.5 billion (about US$34.7 million) Export Credit Agency (ECA) and another Ksh3 billion (Euro 35 million) ECA facility as well as facilitate a special dividend.

Announcing the loan, the largest of this kind in the Kenyan market, Joseph revealed that the loan had been approved by both the ministry of finance and the ministry of information and communications.

"The additional cash will allow us continue with the expansion of our network, to add new functionality and features to meet the growing demand of our subscribers," said Joseph.

The loan has been arranged by a consortium of nine local banks led by Standard Chartered Bank of Kenya Limited as the global coordinator and book runner, mandate lead arrangers are Barclays Bank of Kenya Limited, Citibank N.A, Kenya Commercial Bank (KCB) and Stanbic Bank of Kenya.

Other banks that played a key role are Commercial Bank of Africa Limited, Cooperative Bank of Kenya Limited, CFC Bank Limited and NIC Bank Limited.

The loan, repayable between 2008 and 2011, will attract interest rate on one percent over the 91-day Treasury Bill.

Safaricom is scheduled to unveil new products, aimed at improving on its service delivery, in the next two weeks. The new products come in the wake of subscriber expansion that was projected to hit a 4 million mark by the end of March and close to 5 million subscribers by the end of the company's financial year.

Safaricom will also pay a dividend to its two shareholders, Vodafone and Telkom Kenya Limited (TKL) according to the proportion of their shareholding in the company, which stands at 40 and 60 respectively.

However Joseph pointed out that TKL's dividend would be used in turn to pay a debt owed to Safaricom by TKL.

"As at December last year, TKL owed Safaricom KSh2 billion (about US$27.7 million) as the principal debt thus the dividend will be more of a book transaction meant to offset part of the debt," announced Joseph.

Meanwhile Kenya's minister for information and communications, Mutahi Kagwe, said his ministry is looking for ways to ensure that Kenyans access affordable mobile services.

He said the ministry was in negotiations with the ministry of finance for a possibility of lowering taxes charged on mobile call tariffs.

Kagwe also said that the need to grant an international gateway to both Safaricom and Celtel Kenya would be an advantage in reducing the high rates charged on international calls.

"We have already presented a paper to the minister of finance, Amos Kimunya, in relation to the reduction of taxes on mobile calls," Kagwe said.

East African Business Week