Kenya: Safaricom loses 332.5bn in market cap as share retreats

Safaricom has lost Sh332.5 billion in market value at the Nairobi Securities Exchange (NSE) in three months, with its share price falling 18.3 percent from an all-time high of Sh45.25 recorded on August 23.

The telco closed trading at Sh36.95 Wednesday when its market capitalization stood at Sh1.48 trillion, down from the peak of Sh1.81 trillion.

The decline has occurred in recent days when the payoff from the company’s heavy investment in Ethiopia has come under uncertainty from the ongoing conflict in that market.

Safaricom’s ultimate parent company, Vodafone Group Plc said the Ethiopian consortium is “proceeding with and adapting its plans for operational readiness, mindful of the recent declaration of a state of emergency in Ethiopia.”

The government is fighting Tigrayan forces and their allies who have threatened to march on the capital Addis Ababa.

The conflict threatens to disrupt Safaricom Ethiopia’s operations and the subsidiary’s breakeven timelines.

Safaricom’s chief executive Peter Ndegwa said the Ethiopian venture was projected to break even by the fourth year of operations before the political instability escalated.

“Our break-even target may be significantly impacted by the impact of the current conflict on the launch of operations which we target by mid-2022,” he said recently when announcing the firm’s results for the half-year ended September.

The conflict comes as Safaricom has revealed large borrowings, which it is using to fund the investment in Ethiopia as the major shareholder with a 55.7 percent stake in the joint venture comprising its parent firms Vodacom Group and Vodafone Group Plc.

The telco’s debt rose to a record Sh76.9 billion in the half-year ended September as it raised funds to help pay for its Ethiopian license besides investing in its operations.

The firm’s debt increased 5.2 times from Sh14.7 billion a year earlier. Safaricom noted that it held cash and cash equivalents of Sh26.4 billion in the review period, placing its net debt at Sh50.5 billion.