Wednesday, November 22, 2006







SAFARICOM/ MOBITELEA- Ask Sarin
Here is my two cents on the Safaricom issue.
Safaricom Shareholding as at 2000(Vodafone Plc) Press release(link to it)
Telkom Kenya
60%
Vodafone Airtouch
40%

Safaricom
Shareholding as at 31st March 2006(Vodafone Annual Report)
Telkom Kenya Ltd 60%
Vodafone Kenya Ltd 40% .Vodafone Plc **35% effective interest in Safaricom
Mobitelea Ventures ** 5% Effective Interest in Safaricom

*Vodafone Plc holds Management control as per a Shareholder Agreement.
*Vodafone Airtouch Plc changed name to Vodafone Plc.
**Vodafone Kenya Ltd assumed to hold 40% stake directly for both Vodafone Plc. and Mobitelea Ventures

Vodafone Plc Annual Report-31st March 2005. (Extract)
“Safaricom
On 10 January 2003, under an agreement with Mobitelea Ventures Limited, the Group
completed the purchase of a 5% indirect equity stake in the Group’s Kenyan associated
undertaking, Safaricom Limited (“Safaricom”), for approximately $10 million
(£6 million), increasing the Group’s effective interest in Safaricom to 35%.”

As you can deduce from the above, the Telkom stake has been constant at 60% but the Vodafone Plc stake appears to have gone from 40% to 30% and then to 35%. It’s Vodafone giving up its Shareholding and not Telkom. So no problem/loss to us Kenyans.

Meaning that if there any questions about the ‘new’ Shareholder, Vodafone Plc and Arun Sarin
(CEO) may be a good place to start. Hope this stops the misinformed bloggers out there putting out wild theories (e.g. ColdTusker).

The other thing is that Safaricom is a Private Company i.e. pre-emption rights apply.5% of it is Carte Blanche to stick up Vodafone for a large sum. Why hasn’t the owner of this stake sold it to MTN or Cegetel after giving Vodafone an impossible offer? This is what I would do if I was Mobitelea.

The reason can only be that Mobitelea Ventures is partially owned or is known(to Vodafone) and acts in concert with Vodafone Plc in regard to Safaricom. Note: The Annual Report says Vodafone Acquired an indirect stake in Safaricom. Therefore, control must be through another legal entity i.e. Holding company.

We must be careful as a country not to act in a manner that scares away investors. See how Russia’s attempts to right past Privatization wrongs i.e. Yukos affair have affected investor outlook. Everyone is afraid to deal with ethnic Russian investors. Because you never know when the Government may slap you with millions in back taxes and take away your joint venture. Just ask BP.

Hence, what investors call Political Risk for Russia is up.Russia has Oil,Gas,Guns and the Bomb.They can stomach the risk, i dont think we can.

14 comments:

coldtusker said...

How Kenya loses:

If Mobitelea is NOT owned 100% by Vodafone, it means someone else got 10%. Who are they?

Basically, Vodafone was brought in as a STRATEGIC shareholder who was to provide financial & technical assistance.

If you just wanted a "shareholder" there were MANY Kenyan firms who could have stepped in. Again, just as a SHAREHOLDER.

Furthermore, Yukos among other Russian natural resources/assets were fradulently obtained at throwaway prices by insiders.

Yes, we are waiting to know who owns Mobitelea!

Gathara said...

If I'm not mistaken, Safaricom had to go through a tendering process before they were allowed to set up shop as Kenya's first mobile phone service. If Mobitelea's 5% stake existed then and was not declared during the tender process, it then amounts to a bribe paid by Vodafone to Moi and his cronies.
In that case, it is possible that Kenya did not get the best deal (I think Safaricom paid $55M for the licence) and it would constitute a rip-off for Kenyans as a whole.
Secondly, if a 65-35 (or 70-30) split between the public-owned Telkom and Vodafone was available we weren't told about it and the former regime pocketed the proceeds of the extra 5-10% that should have been rightfully ours. Either way, the public loses.

coldtusker said...

pesa tu...

Pesa imemwagika... LOL...

Basically as gathara puts it... did Kenyans get $55 Million for 30% or 40%... If Vodafone was OK with 30% then Telkom should have 70%.

The 10% at today's values is over $100 Million...

Klara said...

Wow! Shares, Percentages, ownerships,etc! I kinda like this blog even when da business language is hard to elewa!
Am hopin buy this shares!!any advice??

pesa said...

@klara:Thanks. will go light on the 'big' words@Coldtusker:I dont know where u get the evidence connecting the prominent members of the past regime to the 5%.'Show me the trail or evidence.But lets not throw wild ,unsubstantiated and opinionated assumptions around.

Kenyans gave Vodafone 40% and Telkom 60% in 2000.It still stands like that today.The shareholding change involving Mobitelea most likely occurs in the books of the Vodafone subsidisary.(Will do a post to illustrate how this can be done).

But Vodafone then decided to give a 10% indirect stake in Safaricom to Mobitelea through a subsidiary company, then buy back 5% from Mobitelea

Can give u a contact(privately) where u can get a hardcopy of the latest Vodafone Annual Report

@Gathara: Safaricom paid US$55 million for a licence because CELTEL/KENCELL had paid a similar amount and CCK asked Safaricom to fork out the same.
Had Kencell paid US$100 million, then Safaricom would have been forced to pay out a similar amount..
P.S. KENCELL wasn't the highest bidder for the Licence.

Legally, i dont think anything illegal was done and there's nothing much we can do.Since Vodafone r the guys who reduced the stake we gave them not us(Kenyans).

@Everyone: I know understanding cross-shareholdings across several jurisdictions may be hard.I'll do a diagram to show how the shareholdings probably stand.(using info from the Annual reports of Vodafone.
I should have done a diagram to make it understandable.

Its good when we can express our views freely thanks CT for the prompt response.

Gathara said...

pesa tu,
Safcom was the first mobile phone company. They paid their $55M way before Kencell ever got on the scene. You need to check you facts.

In addition to my earlier arguments about the loss suffered by the public, consider this: when Safcom launched their bond on the NSE, they were required to declare their shareholders. The fact that they didn't declare Mobitelea's stake amounts to yet another fraud perpetrated on the people of Kenya, whose money they were borrowing. Also, Kagwe has declared in Parliament recently that the Safcom file at the Registrar of Companies only lists two shareholders. It is illegal for Safcom to provide false information to that office.

Finally, I think the question we should be asking is: why the secrecy surrounding Mobitelea's stake? Why is it that the Nation could not find any records of who the directors are even though such information is meant to be public?

Jimmy said...

When Vodaphone plays around with part of it share holding at SFCOM, how does this hurt us? Is it a Kenyan thing or what? Some of us immediately come up with weird conspiracy theories with a steep slant on present day politics. The shareholding structure was effected long before the current regime came into power. The guys who should be claiming a short change should be Vodaphone share holders not us. We had asked for 60% stake, got it, and still retains it, period

Gathara said...

Jimmy,
The question we are all concerned with is whether Vodafone paid a bribe to secure its stake in Safaricom. Even you should be able to discern that if this actually happened then we the public stand to lose. We cannot allow our leaders the proverbial 10% kitu kidogo. That would be the first step on the road back to economic destruction, the very place we're trying to get away from. To suggest, as Kiraitu did with reference to Anglo-Leasing, that there is no scandal if we don't lose any money is sheer folly and the height of stupidity.

Rules and regulations governing such deals exist to protect the public interest and if you allow them to be compromised even once, you negate them for all time.

pesa tu said...

@Jimmy: i totally agree with you.
Nope it doesnt hurt us.

@Everyone: i started this blog to fight the Financial illiteracy and ignorance.The post on Safaricom was mainly to illuminate the issue and give a clearer view of the facts.
I honestly don't understand how guys like CT and others quckly come up with allegations of bribery and Corruption(mind u they dont give evidence).
Support your claims.

@Gathara /CT:This info has been public for more than two years.Anybody with interest could have found it.I have known it for about 16 months.

Gathara said...

pesa tu,
If your intention was to illuminate the issues surrounding the Safaricom controversy, then your posts have succeeded in casting more darkness on an already obscure topic. As I said in my reply to Jimmy, the question we are all concerned with is whether Vodafone paid a bribe to secure its stake in Safaricom. If they didn't, then I'm sure that there is a perfectly reasonable explanation as to how Mobitelea Ventures came by 10% of Safaricom. However, your posts fall short of providing such an explanation.

Gathara said...

pesa tu,
If your intention was to illuminate the issues surrounding the Safaricom controversy, then your posts have only succeeded in casting more darkness on an already obscure topic. As I said in my reply to Jimmy, the question we are all concerned with is whether Vodafone paid a bribe to secure its stake in Safaricom. If they didn't, then I'm sure that there is a perfectly reasonable explanation as to how Mobitelea Ventures came by 10% of Safaricom. However, your posts fall short of providing such an explanation.

pesa tu said...

@Gathara: am only dealing with how the shareholder structure between Safaricom/mobitelea and Vodafone Plc. may be.
Questions of impropriety , i leave to those skilled in such matters.

After all Vodafone Plc may have a perfectly valid and legitimate explanation for the shareholder structure.

Gathara said...

pesa tu,
It is the mystery surrounding this shareholding agreement that is raising questions of impropriety. Specifically, how, when and why Mobitelea Ventures came to control 10% of Safaricom.

You seem to be saying that Mobitelea owns part of Vodafone Kenya Ltd (VKL) but as at 2000, VKL was 100% owned by Vodafone Plc. As I have written elsewhere, the Registrar would be able to verify if any transfer of shares in VKL ever took place since VKL is registered here in Kenya. If that is the case, then why didn't Vodafone or Mobitelea simply declare this? My bet is there's more to this than meets the eye.

Anonymous said...

The East African, November 20, 2006…"Questions as to whether Mobitelea Ventures Ltd actually paid for the shares in Vodafone Kenya or whether the shares were given to them gratis in exchange for services they may have rendered to the British investors." – IS the QUESTION

Mobitelea has already sold 5% shares for $10million; this was from their initial 10% shares and there is no record of Mobitelea having purchased any shares in the first instance. Is it possible to sell or receive payments for that which you have not acquired within an existing legal frame work?