stakehigh
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- Aug 9, 2019
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Nairobi, Kenya - The Kenyan government is signaling its intent to sell a portion of its stake in the highly profitable telecommunications giant, Safaricom. The move, aimed at raising a substantial Sh149 billion ($1.15 billion) for the 2025/26 fiscal year, is poised to be one of the largest transactions in the region and has already attracted the attention of global private equity firms.
This strategic sale is part of a broader government initiative to fund its budget and manage escalating debt repayments without resorting to new taxes. Safaricom, a consistent top performer and the most profitable company in East Africa, is seen as a prime asset for this privatization drive.
Market experts, like Wesley Manambo, a Senior Research Associate at Standard Investment Bank, suggest that an off-market transaction could yield the maximum return for the government, allowing for a premium on the current market price, which some analysts believe is undervalued. At the prevailing share price of around Sh19.90, a sale of a 5 to 10 percent stake could generate between Sh39.8 billion and Sh79.7 billion.
The 2008 IPO saw the government sell a 25% stake, or 10 billion shares, raising Sh51.75 billion in a sale that was oversubscribed by 532 percent.
The company projects that its earnings could surge by as much as 50 percent in the current financial year, driven by a significant reduction in losses from its expanding Ethiopian venture.
The government's last major privatization was the Safaricom IPO in 2008, and this renewed push is seen as a critical step in its fiscal strategy. The success of the Safaricom stake sale will be closely watched by investors and could set the tone for future privatizations in Kenya.
This strategic sale is part of a broader government initiative to fund its budget and manage escalating debt repayments without resorting to new taxes. Safaricom, a consistent top performer and the most profitable company in East Africa, is seen as a prime asset for this privatization drive.
Investor Appetite High for a Piece of the Telco Giant
Analysts anticipate a significant scramble for the Safaricom shares, citing the company's predictable revenues and steady cash flows, largely fueled by its dominant M-Pesa mobile money platform and data services. The sale could take the form of a secondary public offering (SPO), similar to its hugely oversubscribed 2008 IPO, or an off-market block sale to a high-net-worth investor or private equity fund.Market experts, like Wesley Manambo, a Senior Research Associate at Standard Investment Bank, suggest that an off-market transaction could yield the maximum return for the government, allowing for a premium on the current market price, which some analysts believe is undervalued. At the prevailing share price of around Sh19.90, a sale of a 5 to 10 percent stake could generate between Sh39.8 billion and Sh79.7 billion.
The 2008 IPO saw the government sell a 25% stake, or 10 billion shares, raising Sh51.75 billion in a sale that was oversubscribed by 532 percent.
Financial Performance and Future Outlook
Safaricom continues to post impressive financial results. For the fiscal year ending in March 2025, the company reported a 7.2% growth in net profit to Sh45.7 billion, including its operations in Ethiopia. Following these strong results, Safaricom proposed a final dividend of Sh0.65 per share, building on an interim dividend of Sh0.55 per share. This total dividend payout of Sh1.20 per share will result in a Sh16.8 billion windfall for the National Treasury from its current 35% stake. A sale would mean the government forgoes a portion of this future dividend income.The company projects that its earnings could surge by as much as 50 percent in the current financial year, driven by a significant reduction in losses from its expanding Ethiopian venture.
Broader Privatization Push
The planned sale of the Safaricom stake is a key component of the government's effort to raise revenue from state-owned enterprises. The Kenya Pipeline Company (KPC) is another profitable entity slated for privatization. The proceeds from these sales are intended to supplement the Sh3.3 trillion revenue target from taxes and other levies to fund the country's Sh4.2 trillion budget.The government's last major privatization was the Safaricom IPO in 2008, and this renewed push is seen as a critical step in its fiscal strategy. The success of the Safaricom stake sale will be closely watched by investors and could set the tone for future privatizations in Kenya.
