The Explainer: Safaricom Valuation Is Neither Outdated Nor Undervalued

The assertion that the government’s proposed sale of a 15 per cent stake in Safaricom is based on an “outdated valuation” risks oversimplifying what was, in reality, a rigorous, multi-layered valuation process grounded in both market practice and financial fundamentals.

Appearing before the parliamentary committee, Treasury Cabinet Secretary John Mbadi made it clear that the KSh 34 per share price was not arbitrarily arrived at, nor was it anchored on historical data alone. Rather, it emerged from a comprehensive assessment conducted using a range of widely accepted valuation methodologies, precisely the kind used by investment banks and capital market practitioners globally.

At the centre of this process was the Kenya Commercial Bank Investment Bank, which acted as the Treasury’s valuation advisor. The institution prepared a detailed valuation report incorporating several metrics that collectively paint a holistic picture of Safaricom’s worth.

These included net asset value, earnings performance, dividend flows, and discounted cash flow (DCF) analysis. Importantly, Safaricom’s status as a listed company made price discovery more transparent, allowing the valuation to be benchmarked against observable market data rather than conjecture.

The results of these individual valuation approaches are instructive. Valuation based on earnings placed Safaricom’s share value at KSh26. The price-to-earnings method yielded KSh17 per share, while the discounted cash flow analysis came in at KSh18.51.

The discounted dividend model produced a valuation of KSh23.61, and the six-month weighted average trading price stood at KSh27.50 per share. Taken together, these figures underscore a consistent valuation range well below the proposed transaction price.

Crucially, the average valuation provided by leading investment banks, institutions whose core business is valuing, pricing, and trading equities, stood at KSh30.82 per share. These banks employ teams of highly qualified accountants, analysts, and financial modelers whose credibility rests on getting valuations right in real-market conditions. Against this backdrop, a transaction price of KSh34 per share represents not an undervaluation, but a clear premium over both market averages and fundamental valuation benchmarks.

This premium directly addresses concerns that the government is underselling a strategic national asset. Far from relying solely on historical trading data, the valuation process blended forward-looking methodologies with market-based indicators, ensuring that future earnings potential, dividend sustainability, and cash flow generation were factored into the final price.

It is also worth noting that in capital markets, valuation is not an exact science but a range-based exercise informed by assumptions, risk profiles, and prevailing market conditions. Expecting a single “perfect” price ignores the reality that even private sector transactions are concluded within negotiated ranges, often at premiums to prevailing market prices, especially where strategic stakes are involved.

In this context, the KSh34 per share price reflects a balance between market realities, professional valuation advice, and the government’s fiduciary duty to secure fair value for taxpayers. Rather than being anchored on outdated assumptions, the pricing appears firmly rooted in accepted valuation practice and supported by independent, market-facing institutions.

Ultimately, the debate should not be whether historical data was used—because all credible valuations use it- but whether it was used intelligently and in combination with forward-looking metrics. On the evidence presented to Parliament, it clearly was.

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