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The East African : March 10th 2014
56 MARCH 8-14,2014 BUSINESS, MARKETS AND FINANCIAL ANALYSIS THE MARKET WHISPERER EQUITY MARKETS (WEEKLY CHANGE IN BENCHMARK INDEX) NSE 20 Share Index Kenya 4,906.72 -0.54% (CUMULATIVE MOVEMENT) DSE All Share Index Tanzania 2,018.97 1.19% USE All Share Index Uganda 1,494.00 7.71% RSE All Share Index Rwanda 146.17 1.59% JSE All Share Index South Africa 47,105.66 1.73% NGSE All Share Index 38,952.47 Nigeria - -0.55% Which way big fo≥eign telcos in E. Af≥ica? I s consolidation in the regional telecom business the next phase of growth? It seems so. Last week, Safaricom and Airtel said they will put up a joint bid to acquire Kenya’s smallest mobile operator in a deal estimated at $100 million, although details of the transaction remain scant. Under the arrangement, Safa- ricom will acquire the assets of yuMobile — Essar’s Kenya subsidiary — while Airtel will take over the firm’s customer base estimated at 2.7 million. The announcement of deal comes as online magazine tmtfinance.com quoted sources saying that Orange had contracted Lazard, a financial advisory and asset management firm, to scout for potential buyers of its Ugandan unit. Less than a year ago, Air- tel acquired Warid Telecom Uganda in a deal that helped the company net 2.8 million new customers, pushing its market share to about 40 per cent, against MTN’s estimated 51 per cent. The new subscriber market shares in Kenya after the transaction will leave Safaricom’s unchanged at 66.5 per cent, Airtel’s at 26.4 per cent and Orange tunity to build up their numbers. In the past, the company has waged an aggressive marketing war centring on price cuts but it has been unable to win a substantial number of Safaricom customers. Cheap prices But then again, yuMobile has been known for its cheap prices — it charges Ksh15 ($0.17) per day for free yu-to-yu calls — meaning that these customers are likely to have low average revenue per user (ARPU). But for yuMobile, and at the yuMobile sales agents use their mobile phones during a promotion. Safaricom will acquire the assets of yuMobile while Airtel will take over it customer base. Picture: File at 7.1 per cent. Essar had an estimated mar- ket share of 8.8 per cent. Analysts at Standard investment Bank believe that Safaricom was keen to acquire the infrastructure, which includes the frequencies, because of challenges it has had with its existing network and shortage of frequency with high traffic. But yuMobile did not run a 3G network, so the 2G network would essentially need to be upgraded. But if it acquires the frequen- cies, analysts say that Safaricom’s share of the deal may be substantially higher than the estimated $100 million. For Airtel, the deal provides them the much-needed oppor- The next few weeks will clearly be defining for East Africa’s telecom sector confirmed price of $100 million, the company will book substantial losses. Last year, yu bought the 20 per cent stake held by its local partners for an undisclosed amount. SIB also estimates that yu- Mobile has invested about Ksh35 billion ($400 million) in its Kenyan business since its launch in 2009, but has accumulated losses of Ksh25 billion ($287 million) and continues to incur a loss of Ksh3 billion ($34.4 million) annually, making its existence financially inviable. The next few weeks will clearly be defining for East Africa’s telecom sector. Rea Vipingo suito≥s continue to sweeten the deal THE COURTSHIP for Rea Vipingo is getting more interesting. Last week, the Nairobi Securities Exchange- listed investment firm Centum and Rea Trading (who own 57 per cent of Rea Vipingo) sweetened their offers to shareholders in the agriculture firm. Rea Trading offered to buy each share at Ksh70 ($0.8) and pay a further Ksh15 ($0.17) per share should it sell the firm’s land before 2018. It further said that it would consider retaining the firm as a listed company. Centum offered to buy each share at Ksh70 ($0.8) up from an earlier of- fer of Ksh50 ($0.57). The raise of the share price is a preview of Centum’s broader strategy. In a newspaper advert last week Centum invited applications for the position of General Manager, Agribusiness Division. The advert stood out for a number of things. One, the company does not have an operational agriculture division, implying that it is getting into this sector. Two, Centum aims to generate at least $200 million from this division in the next five years. Quite a high figure if you consider that Mumias, Kenya’s largest sugar company, generated about Ksh7.13 billion ($81.9m) in revenues in the six months to December last year. Given this context and the appointment of a general manager for the division, it is likely that the company plans a series of acquisitions to deliver these revenues. Considering the strategic value of Rea Vipin- go’s land in light of Centum’s new agribusiness plans, its strong cash position – Centum has liquid assets worth Ksh5 billion ($57.4m) and has an undrawn credit facility of Ksh800 million ($91.9m) — the battle for Rea Vipingo is just beginning. 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 Ciga≥ette make≥’s p≥ofits d≥op British American Tobacco Uganda (BATU) has reported a 18 per cent drop in net earnings for the year ended December 2013. The company’s after tax prof- its dropped from Ush12.1 billion ($4.8m) in 2012 to Ush10.8 billion ($4.3m) last year. Analysts at the Crested Securities said the firm’s performance was weighed down by expenses incurred during the decommissioning the Kampala Processing plant in June 2013, the cost of a law suit amounting to Ush35 billion ($13.86m), reduction in cigarette sales volumes, the introduction of import duty on cigarettes and a 43 per cent weighted average increase in cigarette excise tariffs. The company decommis- sioned its Uganda plant, preferring to subcontract its production to BAT Kenya in a move meant to slash costs. Despite the increase in government taxes, BATU’s contribution in excise duty, value added tax, import duty and income tax dipped by 13.7 per cent to Ush63 billion ($24.94m) in 2013.
March 3rd 2014
March 17th 2014