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The East African : May 3rd 2015
48 MAY 2-8,2015 BUSINESS, MARKETS AND FINANCIAL ANALYSIS THE MARKET WHISPERER EQUITY MARKETS (WEEKLY CHANGE IN BENCHMARK INDEX) NSE 20 Share Index Kenya 5,091.43 0.60% (CUMULATIVE MOVEMENT) DSE All Share Index Tanzania 2,699.61 1.53% USE All Share Index Uganda 2,013.00 -1.23% RSE All Share Index Rwanda 136.87 -0.13% JSE All Share Index South Africa 54,467.10 -1.37% NGSE All Share Index Nigeria 34,337.85 -0.43% Jan ‘15 Feb Mar Apr ‘15 Jan ‘15 Feb Mar Apr ‘15 Jan ‘15 Feb Mar Apr ‘15 Jan ‘15 Feb Mar Apr ‘15 Jan ‘15 Feb Mar Apr ‘15 Telkom Kenya’s new suito≥s get access to its data A local telecommunications company and a private equity firm with headquarters in London, which is also a major player in the local equities market, have emerged as the leading suitors for France Telecom’s stake in Telkom Kenya. The French conglomerate has a commanding 70 per cent stake in the troubled firm, the remaining shares being held by the state. The EastAfrican has learnt that the two companies have been given access to Telkom Kenya’s data room to help them to conduct due diligence on the company. If the local company wins, then Kenya could witness a trend towards consolidation of the local mobile telecommunications industry. The country’s mobile sector has been witnessing muted growth since 2011. This has resulted in an environment where weaker players have been cancelling or delaying non-essential capex spend. Mobile penetration has also remained flat. Telkom Kenya has been in financial straits for a Jan ‘15 Feb Mar Apr ‘15 trum is going on between mobile companies in Kenya. The stakes are high because, depending on what happens to Telkom Kenya, its collapse could free up a significant band of spectrum, including what was originally allocated for older technologies. The explosion in the de- An Orange shop in Nairobi. France Telecom is looking to sell its 70 per cent stake in Telkom Kenya. Picture: File long time. In 2013, its annual revenues stood at Ksh9.4 billion ($99 million), compared with Safaricom’s monthly revenues of Ksh12 billion ($126 million). The average revenue per user was Ksh200 ($2) compared with Safaricom’s Ksh546 ($5). Subscribers were 2.2 million, compared with 5.5 million for Airtel, 2.2 million for yuMobile and 21 million for Safaricom. In 2012, and in accord- ance with the shareholders’ agreement, the two shareholders were called upon to fund a balance sheet restructuring exercise that was supposed to lift the company out of insolvency. With the government having failed to put in its share of the cost of restructuring the company’s balance sheet, its shares were diluted from the original 49 per cent down to 30 per cent. But why would anyone want to buy Telkom Kenya? The company’s main value proposition is the spectrum — the airwaves that carry communication signals — and the infrastructure it owns. Due to limited spectrum availability, wireless network providers are struggling to meet the growing demand from bandwidthhungry data applications (apps). Away from the limelight, a major scramble for spec- mand for data traffic in Kenya has placed a very high premium on spectrum. This is mainly driven by an unprecedented penetration of the market by dataconnected devices such as smartphones and tablets, which drive network traffic far more than traditional devices such as basic phones. In particular, the expo- nential growth in consumer demand for data-heavy applications and videos has put enormous pressure on services that use wireless spectrum. Companies now fear that their existing spectrum allocations may soon be overwhelmed, leading to slower connections, longer download times and more call drops. Uganda’s NSSF proposes 15pc increase in contributions A NEW proposal aimed at raising individual monthly contributions remitted to Uganda’s National Social Security Fund (NSSF) is likely to antagonise employers and employees already faced with difficult spending decisions. It also raises questions about the government’s policy motives in the pension sector. The Fund has suggested a higher contribution rate of 20 or 30 per cent compared with the existing 15 per cent charged to employees working in the private sector and statutory organisations. Under the current arrangement, employers contribute 10 per cent while employees remit five per cent of their monthly salaries. Age benefits account for nearly 70 per cent of all members’ claims, according to NSSF records. Uncovered mandatory benefits include medical and maternity, unemployment, education and home owner- ship benefits. While average welfare payments pegged to existing benefits have grossed Ush12 million ($4,000) per member in recent years, NSSF’s resources are not sufficient to cover other benefits under the 15 per cent contribution rate, according to Richard Byarugaba, its managing director. A higher contribution rate would plug the funding gap and also improve access to mediumterm social security benefits for its members. However, NSSF’s proposal seems to go against the government’s plan to liberalise the pension sector. What opportunity would a 30 per cent NSSF contribution rate offer new players in the sector? How many employers and employees would embrace a higher contribution rate in a sluggish economy dominated by depressed salaries and diminished company budgets? 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 Wyndham Hotels plans EA expansion THE US-BASED Wyndham Hotels and Resorts Group is planning an entry into three more East African countries with its Ramada brand after it set foot in Tanzania last month, signalling sustained confidence in the region. “The Ramada Addis and Ra- mada Nairobi are expected to open their doors later this year, with the Wyndham Amboseli due to open in 2017. We are also opening a Ramada Encore in Dar es Salaam over the coming months,” said Dan Ruff, Wyndham Hotel Group president and managing director for Europe, Middle East, Africa and Indian Ocean. Wydham will compete with The year when Wyndham 2017 Amboseli will open other global leading chains like Starwood Hotels and Resorts Worldwide, the Rezidor Hotel Group. Starwood plans to open 50 new hotels in Europe, Africa and the Middle East in the next five years.
Apr 27th 2015
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