Tuesday, November 28, 2006


The Current issue of the East African summarizes what was in my earlier posts on the Safaricom/Mobitelea issue.


They have a better graph of the shareholder structure.

However, the graph showing the present day shareholder structure of SAFARICOM K Ltd. has an error. It shows Telkom Kenya Ltd. having a 60% stake in Safaricom and Vodafone K ltd with a 35% stake in Safaricom instead of a 40% stake.

The 87.5% stake in VKL by Vodafone Plc. and 12.5% stake by Mobitelea ventures is accurate.

The article also says that the Parliamentary Investment Committee (PIC) has summoned the Registrar of Companies and the Safaricom M.D. to explain the matter.

The following issues could thwart the PIC effort:

1.Mobitelea Ventures could be registered offshore, so no record of it may be at the Kenyan Company registry.

2.Safaricom officials may claim to only know about Safaricom Kenya Ltd. matters i.e. they are not Vodafone Plc or Vodafone K ltd employees. As such they can’t shed any light on Mobitelea or Vodafone Kenya Ltd. Shareholding.

It is akin to asking Gerald Mahinda(MD -EABL) to comment on SABMiller Plc's affairs because SABMiller Plc has a 20% stake in Kenya Breweries Ltd(an EABL subsidiary).He can't since neither he nor EABL are members of SABMiller Plc.

NB: the article is in the current Print Edition and may take a while to appear online.

Sunday, November 26, 2006


A fellow blogger Keith has mirrored part of the original post on his blog.He has also drawn a more LEGIBLE chart of the probable Shareholder structure.

CLICK here to go to TeleBusillis

Friday, November 24, 2006

My Investment style

I believe investing is a psychological game with monetary outcomes (you make profits or losses). To make money in the market (most of the time) all you have to do is take a position and wait for the price to rise. For instance, in the past 2 months you could have bought Barclays at sh250 and Jubilee Holdings at Sh180 and gotten out at Sh.600 (Barclays) and sh300 (Jubilee Holdings) now.

That’s the easy part, to get into a position you need guts/balls/confidence and to get out at a good price you need to tame fear and greed.i.e. You fear you are getting out at a lower price i.e. the price of the share may appreciate after you sell.

How do i buy a shares?
I consider the following four factors sometimes together sometimes in isolation. For instance, i recently added
Jubilee Holdings to my portfolio. I only considered the Market sentiment and the numbers when purchasing it.

The four factors are:
1. Big picture
Meaning how the Economy and the sector will grow in 5-10 years and where that company will be then. I like it if the firm's sector is growing and the firm can corner a large section of the sector.

2. Management track record
If the management/owners have a record of delivering, it definitely makes the firm appealing.

3. Market sentiment
If the market undervalues a share or ignores good prospects in a company. That's the time to get in. Because markets tend to rise over time BUT not in a straight line. Like
Kenol Kobil when it was at Sh.65

I remember when KPLC was sh.330 a share in the late nineties, then Sh.6 in 2002 and today it’s at sh.288 today.
At all those prices there were experts who could 'justify' that price with charts, Valuation models and research.

Investors who bought at sh.330 still don't have their money back (KPLC didn’t pay dividend in some years). Those who bought at sh.6 are marveling at their 'intelligence'.

Right now the market favours stocks that have low absolute price i.e. below Sh100 and low issued shares -less than 100,000,000 issued shares e.g.. Jubilee Holdings. My current style is geared towards this.

When the market changes so will I. You can never bet against the market.

Is the Balance sheet healthy? Does the Cash flow appear healthy? Is the firm's debt sustainable? I also look at metrics like
EPS, P/E ratios.

Influential Investors
These are the people who influence my thoughts on investing

-Carl Icahn- I love his tactics

-Warren Buffet-Everybody loves his style. But he is an extremist when it comes to saving his money (borderline miser). What’s the use of being a Billionaire if you can’t have a Gulfstream?

-George Soros -Famous speculator. Only guy to have ever fought against a Central Bank and won big i.e. US$2 Billion. He’s never afraid to lose.

-Richard Rainwater- Got into Cell phones in 1979 and Oil in 1998 when they were considered ‘dead’ sectors. CLICK HERE for a BUSINESSWEEK article that disparaged him but he got the last laugh.

Dr.Gakombe - Few know that he once was a shrewd investor on the NSE.I'll tell the story someday.

Thursday, November 23, 2006


CLICK here to see the chart on


This is a very very simplified Diagram(some information is left out) drawn from information obtained from the Annual reports of Vodafone Plc. as at 31st March, 2004, 2005, 2006. However, its sufficient for illustrative purporses.

Between Vodafone Plc. and Mobitelea Ventures stake in Vodafone Kenya Ltd (VKL), there may be several holding Companies and legal entities (Special Purpose Vehicles). I have ignored this in the simplified chart.
The 87.5% and 12.5% refer to the assumed eventual holdings in VKL by Vodafone Plc. and Mobitelea Ventures through the various legal entities they control.

87.5% control of VKL translates into 35% effective interest of Safricom and 12.5% of VKL translates into 5% effective interest of Safaricom.

There are three facts you must keep in mind when looking at this chart:
1. According to Safaricom, the Shareholding is 60% Telkom Kenya Ltd (TKL) and 40% Vodafone (K) Ltd which is true.

2. According to Vodafone Plc. Annual Reports, they acquired 5% indirect interest in Safaricom from Mobitelea Ventures in 2003.NOTE; they said INDIRECT INTEREST not DIRECT interest. Meaning that Mobitelea Ventures has an indirect interest in Safaricom.i.e.they don’t directly own shares in Safaricom but in another company (VKL) that owns shares in Safaricom

3. The only way to have an indirect interest in Safaricom is through Vodafone Kenya Ltd (VKL). TKL’s stake is still the same as at the time of the Original Agreement in 2000.

Shareholder agreements are legal and still stand since the agreements are between TKL and VKL, not TKL and Vodafone Plc.
The aggrieved parties are Vodafone Plc’s shareholders. TKL isn’t since it agreed a 60:40 split of Safaricom and it still has 60%. Vodafone Plc. diluted its effective interest to 35% from 40%.

Why we are barking up the wrong tree.
The transactions are between Shareholders of VKL (it’s a Private Company), Vodafone Plc and Mobitelea Ventures.TKL, Safaricom Kenya Ltd are strangers to these transactions.

Therefore only the shareholders of the involved parties VKL, Vodafone Plc and Mobitelea Ventures can answer the questions or be aggrieved.

Wednesday, November 22, 2006

Here is my two cents on the Safaricom issue.
Safaricom Shareholding as at 2000(Vodafone Plc) Press release(link to it)
Telkom Kenya
Vodafone Airtouch

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)
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.

Sunday, November 19, 2006

Retirement Benefits Authority (RBA) -Open Day

Yesterday, i went to the RBA event.I've been going for them since last year.
There is a lot of improvment before; there used to be only 2 or so Fund managers and the rest of the exhibitors were Insurance Companies.But yesterday's mix was sort of representative of everyone.

I made by own ranking of the best stands based on two factors; how they presented info to the public and how the staff and the information given(brochures) explained the issues to me/you.
Ladies and Gentlemen...............Drum roll please...The:
Best Exhibitors
AIG Global Investments (East Africa) and Genesis Kenya Investment Managment Ltd.
I couldn't decide on one, both had good people manning the booths.The information they gave was relevant and informative ,not superfluous.I know the basics so i don't need a pamphlet defining what a pension scheme or Trustee is.

Most Improved
ICEA group i.e. they have redefined their Fund Managment and Pension scheme subsidiaries.They now have ICEA Asset Managment Ltd and ICEA Trustees Ltd.I think they will make waves in the next 12 months.

Most Notable Newcomers
Amana Capital Ltd and British American Asset Managers Ltd(BAAM).
With Amana's Personal Pension Product there's no excuse for not having a Pension.They have products with monthly contributions of less than Ksh 2,000

BAAM have similar products(mutual funds) to African Alliance but with better marketing and i would say better execution of the Mutual Fund concept.

Best Concept
ICEA Trustees Ltd.-The Trustee services are worth looking at if you have a high net worth and want to leave something for the next generation(your kids).Alternatively, you could be rich,generous and want to set up a Scholarship fund a' la
Rhodes Scholarship or Rattansi Trust.

Just read the Kenya Gazette- half of it is legal notices relating to Succession cases for Kenyans who died without wills.

What i learned
You cant touch your Pension Funds until you are 50 years old(Last year's Budget made the rule).But you can move it from one scheme to another.

Tuesday, November 14, 2006

Blog Tech Help-Lost Posts

I lost two posts that i made last week. Anybody experienced a similar problem?


I just finished reading the EVEREADY prospectus.My personal opinions are in blue below.
I'll concentrate on the qualitative factors of the company and the IPO.(i think the prospectus covered the financial details adequately).
ColdTusker has summarised the Financial details on his blog
From the prospectus:
-The Par value of the shares was Sh1,000 but a split was done(Pre-IPO) of 1000 to 1 and shares with a par value of sh1 issued.i.e. without the split the shares on offer would be less than 10 million.

-The shares for sale are offered PRO RATA by existing shareholders to the public i.e. its not only SAMEER getting the cash. ICDC, ICDCI and EVEREADY inc. will also benefit.

-The firm concentrates on selling Zinc-chloride and Carbon batteries because we are too poor to afford the latest Lithium, Ni-cd batteries and Rechargeable ones that are common in the Developed markets.

-They have lots of cases by in court brought by former staff for Health complications brought by chemicals used in the Manufacturing process and for benefits.
Most of the cases are covered by insurance so little or no risk to the firm.

-The regional battery market is price conscious and not quality driven i.e. people buy the cheapest battery, not the best.

-The biggest plus is that EVEREADY has a good distribution network that reaches all over the region.
This is what saved EABL from the Castle-South African Breweries onslaught. EABL had a good distribution network in Kenya and South African Breweries did not have one.
By all means buy the shares,they wil rise and you can make a profit.But given the over-subscription you may not get all the shares you apply for.
Long Term Outlook
Unless they change their strategy i.e. import Batteries for sale. they may not completely overcome the challenge from the 'China' batteries