Inside Politics

Safaricom shares hit new highs over Ethiopia bid

Friday, April 30th, 2021 00:00 |
Safaricom CEO Peter Ndegwa.

Lewis Njoka @LewisNjoka

Safaricom share price yesterday rose to a historic high of Sh40.45 per share after it emerged the giant telco was one of the two bidders on the verge of clinching a license to set up a telecommunications service in Ethiopia.

The share price began rising on Wednesday when the news filtered out closing the day at average price of Sh39.9 per share.

By close of trade yesterday, 6.24 million shares worth Sh252.33 million had changed hands on the Nairobi Securities Exchange (NSE) at an average of Sh40.45 each.

Market capitalisation at the time stood at Sh1.62 trillion, the highest since the telco started trading at the Nairobi Securities Exchange in 2018. 

Global Partnership

In a letter dated April 28, the Ethiopian Communications Authority announced that the Global Partnership for Ethiopia, which is the consortium via which Safaricom bid for the licence, and MTN International (Mauritius) were the qualified bidders and would move to the financial evaluation stage of the bid.

Global Partnership for Ethiopia consortium comprises Safaricom, Vodafone, Vodacom, Sumitomo and CDC group. 

“Pursuant to article 34 and 35 of the tender regulations, this list of qualified bidders is published on the ECA and the Ministry of Finance websites and an invitation to the opening of financial offers meeting will be sent to qualified bidders,” said the Ethiopian Communications Authority in the letter.

Ethiopian Telecommunications Authority had invited bids for two licences.

Churchill Ogutu, the head of research at Genghis Capital attributed the surge in share price to Safaricom being shortlisted in the Ethiopian Telecom bid as well as investor anticipation over Safaricom earnings to be announced in two weeks time.

“It happened on the back of them being shortlisted for the Ethiopian telecom bid. It has given some positive sentiments on the counter.

And also the earnings are around the corner. People are expecting, against the backdrop of Covid-19 the numbers will be strong,” he said.

Ogutu said he expects the share prices to remain at that high level for a while considering that virtually all new corporate announcements from the counter have been propelling the stock price upwards.

But even as the share price keeps rising, some fund managers will opt to sell a portion of their Safaricom stock so as to balance their portfolios and cash in on the gains made, according to Ogutu.

Rebalance portfolios

“Some people, because of the different mandates, might be wont to rebalance their portfolios.

Take a fund manager on whose portfolio Safaricom has a higher weighting of 70 per cent as opposed to 50 per cent. He needs to crystallise his gains to take Safaricom back to 50 per cent,” he said.

On Monday, Safaricom in a public announcement warned investors to be cautious when trading in its shares as the price could be affected by the events surrounding the Ethiopian bid. 

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