Safaricom surges 60 pct in E Africa's biggest IPO

Business News

Helen Nyambura-Mwaura

NAIROBI (Reuters) - East Africa's biggest initial public offer debuted on Monday with shares in Kenya's Safaricom SCOM.NR surging as much as 60 percent to value the mobile phone company at more than $4.5 billion (2.3 billion pounds).

<p>Stockbrokers trade at the Nairobi stock exchange during the commencement of trading of Safaricom shares, one of East Africa's biggest initial public offer (IPO) in Nairobi, June 9, 2008. REUTERS/Antony Njuguna</p>
<p>Kenya's President Mwai Kibaki (3rd L) rings the bell to commence the trading of Safaricom Shares at the Nairobi Stock Exchange June 9, 2008. Standing with Kibaki are (From L to 2nd R) Kenya's Finance Minister Amos Kimunya, Nairobi Stock Exchange Chairman Jimnah Mbaru, Chairman of Safaricom Nicholas Nganga and Safaricom CEO Michael Joseph. REUTERS/Handout/Presidential Press Service</p>

The government sold of a quarter of the company -- 10 billion shares -- which now make up 40 percent of the Nairobi Stock Exchange.

The massively oversubscribed IPO signalled renewed investor confidence in Kenya, a country rocked by a post-election crisis this year which killed some 1,300 people and paralysed key sectors of the economy for two months.

Traders said Safaricom shares rose by as much as 60 percent to a high of 8 shillings, up from a price of 5 offered to local investors and 5.5 for foreign buyers.

At the close of trading at 1300 GMT, traders said the shares stood at 7.00 shillings after opening at 7.25.

“It is a realistic price,” said one stock trader who asked not to be named.

Britain's Vodafone VOD.L leads a consortium with a 40 percent stake in the carrier, which commands over 80 percent of Kenya's market and has more than 10 million subscribers.

Analysts say growth potential for the sector is high with only a third of Kenyans holding a mobile phone.

“It is the cheapest of the blue chips. We will see high turnovers,” said stocks analyst Fred Mueni at Tsavo Securities.

With over 860,000 shareholders, Safaricom now has the widest shareholder base of any Kenyan company.

Kenyan President Mwai Kibaki rang the bell before trading and said the IPO’s success vindicated his privatisation policy.

“The response by Kenyan and international investors was overwhelming, making this IPO the most attractive offering in our history and possibly in the rest of Africa,” Kibaki said.

The government raised 51.75 billion shillings from the IPO.

Kibaki noted the IPO would add 200 billion shillings to the Nairobi Stock Exchange, sending its total capitalisation to over 1 trillion shillings.

“So historic is the Safaricom listing, all market fundamentals will never be the same again,” said stock exchange Chairman Jimnah Mbaru.

Nairobi is the oldest and most vibrant stock market in East Africa, though still tiny compared to continental heavyweights in South Africa, Egypt or Nigeria.

Africa's biggest listed telecom firms include South Africa's $33 billion mobile operator MTN MTNJ.J and fixed-line operator Telkom TKGJ.J , Maroc Telecom IAM.CS and a trio from Egypt -- Orascom Telecom ORTE.CA , Telecom Egypt ETEL.CA and Egyptian Mobile EMOB.CA .

Foreign players with operations in Africa include France Telecom FTE.PA and Kuwait's Mobile Telecommunications Co

ZAIN.KW .

One analyst said Safaricom’s 10 billion shares would increase market liquidity which would in turn attract international investors.

“We are now playing in the big league,” said stocks analyst Aly-Khan Satchu from Rich Management. “It is opening the flood gates. This stock has given the market liquidity and this stock exchange is set to boom.”

Eager Kenyans milled around the bourse in downtown Nairobi, while others crammed into the public gallery impatient to see their wealth growth.

“I wanted to know how the prices move so I could decide whether to sell the shares. The price is low and I am disappointed with the amount I was allocated,” said John Masinde, 45, who had tried to buy 80,000 shillings of shares.

Like most Kenyans, Masinde received only 21 percent of the shares he wanted because the issue was oversubscribed by 532 percent.

Institutional and foreign buyers were allotted 31 percent and 15 percent of their bids, respectively.