Kenyan mobile IPO may mark market?s zenith
Tuesday, June 10, 2008
The stage has been set for east Africa?s biggest ? and most hyped ? initial public offering, with record-breaking profits, a share sale almost five-times subscribed and the cheerleading of Kenyan politicians.
Safaricom, a Kenyan mobile phone operator part-owned by Vodafone, begins trading on the Nairobi stock exchange on Monday following the government?s sale of a 25 per cent stake in the group.
In spite of the euphoria surrounding the company, which dominates Kenya?s two-player market and has been valued at KSh200bn ($3.2bn, ?1.6bn, ?2bn), the IPO may mark its high point.
While global operators, such as Vodafone, are looking to Africa to offset slowing growth in core businesses, some African companies have grown beyond the era of rapid expansion and super-normal returns.
Since Vodafone took control of 40 per cent of the company in 2000, it has had a blistering run of success, securing more than 10m subscribers and a market share of more than 80 per cent in a country where one-third of people own a mobile.
But Safaricom is entering a tougher phase as the Kenyans who have yet to enter the market are the poorest people with the least disposable income. What?s more, two new competitors ? and a revived Celtel, the country?s second operator ? will be competing for both them and for Safaricom?s customers.
One emerging markets hedge fund manager in London says: ?The company is in the later stages of growth and therefore mature relative to other African assets. Its market share is also likely to start declining.?
Mobile phone penetration in Kenya, he adds, is higher than in most markets outside South Africa where MTN ? the pan-African group in talks with Reliance Communications of India about a merger ? operates.
Michael Joseph, Safaricom?s chief executive, says: ?As you go down the economic ladder, the people you can bring on to your service spend less even though your capital outlay is the same, so for sure average revenue per user will reduce.?