Safaricom PLC’s Deal Of The Decade Soars It’s Share Price On Ethiopian License As It’s CEO Becomes The Most Watched CEO On The Continent

By Steve Biko Wafula / Published May 26, 2021 | 5:50 pm




KEY POINTS

Safaricom PLC shareholder's paper wealth rose by KES 90.1 billion on Tuesday.

Safaricom closed at a record average of Sh41.75 from Friday’s Sh39.50, giving it a market value of Sh1.67 trillion

The rally has taken Safaricom PLC’s share price gain to 45.5 percent over the past 12 months


eSIM

Nairobi (SokoNews): Safaricom PLC shareholder’s paper wealth rose by KES 90.1 billion on Tuesday as investors rushed to buy the company’s shares after it was awarded a license to enter Ethiopia’s underserved telecoms market. Bringing the NSE alive, something that has been alien to the markets.

It marks one of the largest one-day gains on a single stock in the history of the Nairobi Securities Exchange (NSE). The move made the stock a behemoth of stocks and thrust the CEO Mr. Peter Ndegwa into the global spotlight of the CEOs who will be monitored, tracked, analyzed, and critiqued every single moment. The move made NSE feel like it just had one stock. Something that needs to change.

The telco’s share price closed at a record average of Sh41.75 from Friday’s Sh39.50, giving it a market value of Sh1.67 trillion, the highest since listing at the Nairobi bourse in June 2008.

Shareholders of the brand are an excited lot, wondering whether to sell or hold or buy more. It’s about to get bloody on the streets of the market as people make decisions based on emotions instead of data and professional guidance. Safaricom PLC is the best investment anyone can make during this difficult time but how many can see that?

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The consortium led by Safaricom, Vodafone, British development finance agency CDC Group and Japan’s Sumitomo said Monday they will start operations in Ethiopia next year after they beat South Africa’s MTN to the license. This will definitely change how Safaricom PLC operates and how its performance will be played out at the NSE. This Consortium will definitively develop a culture that will enable them to work together without compromising on their home operations and without breaking any guiding international laws especially those of Ethiopia.

The rally has taken Safaricom PLC’s share price gain to 45.5 percent over the past 12 months, bucking the general bear run trend on the NSE that has been fueled by the Covid-19 pandemic and a receding economy coupled with a toxic political environment. Safaricom PLC has become the life of the party.

The rise was mainly driven by the news of entry into Ethiopia since investors see this as another opportunity for the telco to grow revenues, mostly an emotional aspect given that Ethiopia is an interesting market with a huge population, which is the KEY plus but an intricate political environment that is murky and difficult to navigate unless the Consortium develops a culture that will be instrumental for their success.

Ethiopian officials announced on Saturday morning that a Safaricom-led consortium —which includes its South African parent firm Vodacom— won an $850 million (Sh91.7 billion) auction to acquire a new telecom operating license. The devil is in the detail and as analysts at www.sokodirectory.com have put it, many are waiting for the documents to be availed for the real issues to be revealed and see what is exactly on the table.

The consortium–Global Partnership for Ethiopia–beat its only competitor led by South Africa’s MTN Group whose $600 million (Sh64.7 billion) was deemed too low. The entry of the consortium will end the monopoly of the State-owned Ethio Telecom. Safaricom will have a 56 percent stake in the consortium. This is huge news for Safaricom PLC and it’s the wind it’s needed in its sails to go beyond the much talked M-PESA as the only driving engine. The population in Ethiopia gives the brand the much-needed scale to compete on a global scale like MTN.

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The Safaricom PLC fresh share price rally has lifted the value of the entire stock market –which it now dominates with a share of 62.3 percent— to Sh2.68 trillion, which is the highest level in 34 months. This is a double-edged sword as it also shines a spotlight on the NSE and the need to bring on board other listings like Safaricom PLC or better. The ripple effect of this announcement has seen the banking sector banks rise too by at least 1% purely on the basis that the success of the franchise in Ethiopia, especially if MPESA is on the table, then the profits will trickle down to the local banks which will not want to miss out on the action.

Safaricom PLC was the second highest gainer on the bourse, as foreign investors’ net buying on the bourse hit 136.864 million shares from the net selling of 133.189 million shares on Friday. One depressing factor is that foreign investors can see the value of Safaricom PLC and its importance in the regional economy and why they are buying like it’s the gold standard of investment while local investors are busy wondering where to get information instead of getting professional research data done. Local investors will end up losing out on the value of this great investment option.

The timing of the news meant investors had the weekend to internalize the news, leading to increased activity that saw the shared touch an all-time high of Sh43.45 early in yesterday’s trading session. The worst bit is internalizing information from an emotional point of view instead of getting research being done and looking at the market trends that will happen in other related sectors like banking and services. Our NSE has a weakness where emotions seem to drive the market more than KEY fundamentals and I hope this will change.

Ethiopia is home to more than 112 million people, making it the second-largest country in Africa by population. The market is the cake. The products that the Consortium will be allowed to offer will make or break them because this is a huge market. Just scale the Kenyan market to almost 2 and a half and you will get the picture of why this deal is the deal of the decade and Mr. Peter Ndegwa is the CEO of the moment.

Read More: Demystifying Short-Selling in Kenya’s Stock Market




About Steve Biko Wafula

Steve Biko is the CEO OF Soko Directory and the founder of Hidalgo Group of Companies. Steve is currently developing his career in law, finance, entrepreneurship and digital consultancy; and has been implementing consultancy assignments for client organizations comprising of trainings besides capacity building in entrepreneurial matters.He can be reached on: +254 20 510 1124 or Email: info@sokodirectory.com

View other posts by Steve Biko Wafula


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