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The East African : Aug 25th 2014
56 AUGUST 23-29,2014 BUSINESS, MARKETS AND FINANCIAL ANALYSIS THE MARKET WHISPERER EQUITY MARKETS (WEEKLY CHANGE IN BENCHMARK INDEX) NSE 20 Share Index Kenya 5,024.64 -0.36% (CUMULATIVE MOVEMENT) DSE All Share Index Tanzania 2,410.51 -1.00% USE All Share Index Uganda 1,756.00 -0.45% RSE All Share Index Rwanda 143.41 -0.43% JSE All Share Index South Africa 51,436.56 0.00% NGSE All Share Index Nigeria 41,530.97 0.27% sued a circular calling on the public to submit proposals on an offer by Africell, a Belgian firm, to purchase Orange Uganda. The call last week came as Push fo≥ consolidation of telcos in EA T he Uganda Communications Commission has is- price wars, has put pressure on earnings of smaller players. In Kenya, only Safaricom Safaricom issued a circular informing shareholders that it had struck an agreement with Essar Telecom, which operates in Kenya under the yu brand, to buy some of its assets, mostly base stations, and frequencies for $80 million. Airtel will buy the remaining yuMobile infrastructure and also acquire the current Essar customers. The deal comes ahead of the impending exit of Orange from the Kenyan market through either a full or partial sale of its 70 per cent stake in Telkom Kenya. Viettel, the Vietnambased mobile operator, is said to be keen on Telkon Kenya. The impending sale points to a growing push for consolidation in the sector. Last year, Airtel acquired Uganda’s Warid Telecom. Communications analysts have argued in the past that the region’s mobile sector is too fragmented for all players to make money. This, coupled with the capex spending and has been profitable, with Airtel reportedly making a profit for the first time last year. In Tanzania, Etisalat, the parent firm of Zanzibar Telecom (Zantel) revealed in a bond prospectus that its local unit had defaulted on a loan. Etisalat said an unidentified bank had demanded that Zantel pay back $96 million as the principal plus interest. The Ugandan deal comes ahead of the impending exit of Orange from the Kenyan market Inadequate capital and low revenues have limited the competitiveness of smaller players. Earlier this year, Orange Kenya said it needed a cash injection of about Ksh30 billion ($340m) to continue operations, adding that it would spend Ksh2.5 billion ($28m) in capex this year or about a tenth of the Ksh25 billion ($280m) that Safaricom said it would splash out. Yu has also struggled for financing, failing to roll out a 3G network. This has hurt its competitiveness, as earnings on voice have been growing at a snail’s pace. The lack of funds to deploy a 3G network has reduced the value proposition of the network and eroded its appeal to its core target market, consisting mainly of the youth. In a market with a near 100 per cent voice penetration, a strategy built on data was seen as more practical for smaller players. But even as the sector in Kenya pushes for consolidation, new regulations that allow for the setting up of mobile virtual network operators (MVNO) could open a new window for companies to enter at a lower cost while at the same time offering the same value proposition as established players. Already, Equity Bank has announced that it is leasing excess capacity on the Airtel network and will soon launch its own mobile network. The Communications Au- thority of Kenya has licensed three other players, including Kenya Airways and Tangaza to offer a similar service. An Orange Uganda salesgirl markets the company’s products during a promotion in Kampala. Picture: File Da≥ to allow fo≥eigne≥s to wholly own listed fi≥ms TANZANIA IS to scrap a rule limiting the stake foreigners can own in companies listed at the country’s bourse. The country’s Capital Markets and Securities Authority (CSMA) said last week it had forwarded proposals to the Finance Minister for review, with the changes expected to come into force by the end of the year. Currently, Tanzania restricts foreign ownership of companies listed at the DSE to a maximum of 60 per cent, a factor analysts say has reduced the country’s attraction to international investors. “When the restrictions are re- moved, the country will be able to benefit economically because it will allow vibrancy in the market and attract more issuance,” said Charles Shirima, the CSMA public relations manager. Over the past year, Tanzania has slowly been removing restrictions that limits the free movement of capital in and out of the country as it seeks to bring its regulatory environment in line with the East African Community rules. Lifting restrictions Earlier this year, the Bank of Tanzania amended the Foreign Exchange Regulations by lifting restrictions on foreign participation in government securities, allowing investors from EAC member states to hold up to 40 per cent of all government securities. In June, the country also dis- closed that it had fully liberalised its capital account. “We will have many advantages, because Tanzanians will be able to invest outside the country where before it was cumbersome because they could not do so without a permit from the central bank,” said Juventus Simon, head of operations at Orbit Securities. Published at Nation Centre, Kimathi Street, and Printed at Mombasa Road, Nairobi by Nation Media Group, Box 49010, GPO Nairobi, 00100. Registered at the GPO as a newspaper. Nairobi Office, Tel: 3288000, 211448, 337710, Fax 214531, 213936. Dar es Salaam Office. Tel: 2119657/8. Kampala Office, Tel: 232771, 232772. Fax 232781 Download free QR Readers from the web and scan this QR (Quick Response) code with your smart phone for pictures, videos and more stories IMF fo≥ecasts highe≥ inte≥est on bank loans LENDING RATES in Uganda are likely to rise in coming months in the wake of increased domestic borrowing, the IMF has said. The lender said it sees bor- rowing rates rising by about 10 per cent in the next 12 to 24 months given the projected increase in government borrowing to finance key infrastructure projects. The IMF says the fact that the increase in domestic debt is taking place amid depressed credit conditions will not only put even heavier pressures on interest rates but could also inhibit the central bank’s ability to police the monetary environment. The government is expected to issue Treasury bonds and bills worth 2.75 per cent of the country’s GDP in the current financial year, up from 1.25 per cent issued last year. The increased borrowing will raise yields on government securities, making it more lucrative for banks to lend to the state than to businesses.
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