By Peter Kiragu

YOU probably have bought the blue-chip shares, or if not, you are planning to do so.

But have you considered the risks associated with the com-pany that you so much want to pump your hard-earned money into? Well, there are some risk factors relating to Safaricom’s business which prospective in-vestors are strongly advised to consider before making a deci-sion to buy the shares.

“If any or a combination of these risks actually occurs, Safaricom’s business, financial condition and operating results could be adversely affected. If this occurs, the price of Safa-ricom’s shares may decline and investors could lose part of or all of their investment,” warns the prospectus for the IPO re-leased on Friday.

One of the greatest risks Sa-faricom faces is competition from other operators. Accord-ing to the prospectus, although Safaricom is currently the lead-ing wireless network operator in terms of subscriber market share, it faces stiff competition from Celtel and Telkom Kenya, as well as from local loop op-erators, such as Flashcom and Popote Wireless.

Safaricom will soon be facing additional competition from Econet, which was awarded Kenya’s third mobile licence in 2003. Econet which is ma-jority owned (70 per cent) by Econet Wireless International recently sold 49 per cent of its shares to Essar Communica-tion Holdings, a subsidiary of Essar Global.

This presents a real threat to

Safaricom since the company may have an upper hand in terms of financial resources to fund capital projects such as network roll out. This could result in the mobile telecom-munications industry becoming even more competitive sooner than expected.

In addition, Safaricom will also soon be facing additional competition from Telkom Ken-ya which has been awarded a mobile licence by the Com-munication Commission of Kenya.

Recently, a consortium led by France Telecom won a deal for a 51 per cent stake in Telkom Kenya. The company is already planning a mobile phone serv-ices roll out.

“In the medium to long term, the growth of the company’s customer base will become in-creasingly vulnerable to mar-ket saturation. As a result, the growth in the company’s cus-tomer base may be significantly lower than in past years. As the company continues to attract new subscribers who previous-

ly did not subscribe to mobile telecommunications services, it must take into account that their spending power may be lower than that of existing cus-tomers, thus reducing the aver-age revenue per user,” reads the prospectus in part.

With greater choice, the mi-gration of subscribers is likely to increase, in effect reducing the company’s market share, turnover and profitability.

Mobile telecommunications operators compete for custom-ers principally on the basis of services offered, price, market-ing skills, quality, reliability and coverage area.

As market saturation ap-proaches, the focus of competi-tion will likely shift from cus-tomer acquisition to customer retention. “Accordingly, if the company is unable to offer higher quality of service and better value to its customers, its market share and revenues may not increase to the extent anticipated.”

Safaricom last year raked in 17 billion in pretax profits and most investors are bas-ing their investment decision on the firm’s profitability but the prospectus warns that the company’s historical operating results and growth should not be relied upon as an indication of future performance.

“The company’s operating results may fluctuate in the fu-ture due to a number of factors, many of which may be out of its control,” the document reads, adding that the company has a limited operating history upon which it can be evaluated, hav-ing re-launched operations in the year 2000.

By LoLa oKuLo

AS investors queue to buy Safaricom shares, clients of Nyaga Stockbrokers are still queuing to file claims for refunds.

Nyaga clients are now com-plaining complained about the inconvenience the broker had caused them as they had planned to take part in the Safaricom IPO.

The company which was placed under statutory man-agement is yet to compensate its clients though some have opened up new or transferred their CDS accounts to partici-pate in the Safaricom IPO.

“I have gone to another stock broker and opened another CDS account so as to buy the Safaricom shares but I am fifty-fifty on whether I may

buy the number of shares that I want because these people (Nyaga Stockbrokers) still have my money,” said Patrick Mwangi a doctor who was a client of Nyaga. Mwangi, who went to file his claim for refund last Friday, said he was not very optimistic about get-ting his money before the end of the Safaricom share sale on April 23.

Twenty-five-year-old Ephy Macharia, a former client of Nyaga also said he was disap-pointed that the clients were not protected from such an event. Being jobless, he said he had been trying to find money elsewhere to buy the Safari-com shares.

“I have to buy the Safa-ricom shares. That is why I have moved to a new stock broker. The problem is just

getting enough money to buy the shares since a lot of my money is still with Nyaga,” said Macharia, who joined Nyaga six months ago.

Another client, 33-year-old Nancy Ouma, a teacher, said she could not participate fully in the Safaricom shares

since she did not have enough money to buy as many shares as she would have wanted to.

The last day for receiving claims from customers of Nyaga Stockbrokers is on May 17, three weeks after the end of the Safaricom IPO.

Can YOU outsmart the expert?

12 Nairobi Star H Monday, 31 March 2008

Up to date, accuratebusiness information

NEWS YoU CaN USE, EVErY DaY.

EvEry where I turned on Friday, it was about Safaricom. I had to practically fight my way into Equity Bank, for my meeting.

The Safaricom IPO is the biggest ever undertaken in Eastern Africa and it represents the coming of age of the Kenyan capital markets.

It’s our opportunity to raise our game and move from the lower divisions into the Premier league. It is absolutely in our national interest to execute a successful IPO and I have no doubt that it will not be otherwise.

I predict that this will be a transformative event in the fortunes of our country. It will set a new ‘zeitgeist’ (spirit of the time) for the nation, and by the end of the year, we will be scaling heights inversely proportional to the depths we plumbed in the early part of the year.

I fully expect the IPO to create a sense of nationhood, purpose and unleash an entrepreneurial wave across the country. The banks are also stepping up to the plate.

There has been not a little ill-informed debate about the IPO and it might be worthwhile to rebut some points.

The pricing at Sh5 per share does not mean that it is being overly discounted, when compared against previous IPOs issued at a higher price. (Anyway what’s wrong with giving us a discount - The idea is for us all to make some money surely!)

The Government is raising Sh50 billion by selling 10 billion shares at Sh5 each. They could have sold 5 shares for Sh10 billion each! Not many of us would have been able

to afford a stake, in that situation. The second issue is about the participation of foreign investors. Kenya is not an island. The world is a global village now. No country can turn its face on the world and it really is naive to think we can or even tell the world: “Stop, we need time to think! we will get back to you.” We give international investors a taste, we draw them in and we whet their appetite. This is the starter for them to discover the merits of our great country.

We have quite rightly invited the wider East African Community to also participate in the IPO and we are for the first time going to get an opportunity to see what capital we can mobilise in our backyard.

It will surprise on the upside, that’s for sure. This IPO is the foundation for a building an East African community, that is coordinated and a meaningful economic zone and power in our continent’s affairs. We are setting things up, so as to be the natural leader in this Swahili common market.

Finally, it is about all of us. No country can rise meaningfully unless it has a strong domestic market and the ability to mobilise and deploy domestic capital efficiently. We are set to prove firstly to ourselves and then the wider world that we have the credentials.

The people are set to speak loudly through this IPO and that people power will be the most important development this year. Here is to playing with the big boys. It’s our time, now!

Aly-Khan Satchu www.rich.co.ke is the author of Anyone Can Be Rich, available in local bookshops

riSkS iNVolVED iNSafariCom SharES

Nyaga clients in dilemma as iPo kicks off

iN DilEmma: Nyaga clients flock the firm’s office last week.

Photo/reuters

Photo/PhILIP KAMAKYA

alY khaN’SStar Portfolio

Star biZ

iPo: Let’s Prove to the worLd our PeoPLe’s Power

aNXioUS: retail investors await to buy safaricom shares.