The long-awaited initial public offering (IPO) of mobile telecommunications company Safaricom Kenya is expected to be completed within 12 weeks, says Les Baille, CFO of Safaricom.
This announcement comes after the Kenyan High Court threw out a legal challenge made by three Kenyan ministers from the Orange Democratic Movement (ODM) against the IPO taking place.
The ministers recently opposed the Kenyan government's desire to float 25% of its 60% shareholding (through Telkom Kenya).
The challenge made by the ministers from the ODM covered several issues, but concentrated on the failure of government to enact the Privatisation Act of 2005, which ensures greater transparency towards the sale of Kenyan public assets.
The case was rejected last week by the Kenyan High Court, confirms Baille.
Kenya's Daily Nation states that the judge dismissed the suit because it was "substantially flawed".
The sale is expected to fetch between $450 million and $600 million once listed on the Nairobi Stock Exchange (NSE) and will help Telkom Kenya in its current financial restructuring programme, which has required it to raise $89 million.
The company will become Kenya's largest listed company, with a capitalisation of more than $1.8 billion, and is expected to help boost the Kenyan economy, say Kenyan ICT analysts.
Before Christmas
Despite an imminent appeal by the ODM ministers, winners of the provision of advisory service tenders in the planned Safaricom sale will be called to sign their contracts soon in order to commence the IPO process, says Baille.
"At the moment, these have not been signed, but indications are that they would be signed sometime in the next few days."
When the contracts are signed, it is expected to take up to 12 weeks to complete the process for an offering of its size. This is because full due diligence and approval by Capital Markets Authority and the NSE will have to happen before the IPO completion will take place, he says.
There is a general desire to complete the IPO before the upcoming elections, and Christmas, as it might stall and affect the process, says Baille.
From a business perspective, if the IPO was completed before this, then there are fewer risks to the process, says Baille. Safaricom wishes to complete the transaction as soon as possible in order to resume business operations as normal.
Sources close to the process say that, from a political perspective, there is a chance the elections could bring about a change in government, which means that ODM (a strong contender), if elected, will have the power to stop the process again.
Investor confidence
Once contracts have been signed, this will be a major step forward for investors as the IPO will generate good returns for the applicants, as happened when power supply company Kengen was privatised, notes Baille.
Safaricom is East Africa's most successful revenue operator, with a declared pre-tax profit of $154 million for the year ended March 2006. The company has over five million subscribers.
The IPO will change ownership dynamics significantly, placing 35% shareholder value within the hands of the Ministry of Finance, 40% with shareholders Vodafone, and 25% with the public.
"As a result of government's holding falling below 50%, we will no longer be considered a parastatal and, therefore, not subject to the State Corporations Act. From a day-to-day operational aspect, we do not see any significant change following the IPO."
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