News

By Antony Gitonga and Alari Alare

The Government has said the sale of Safaricom shares to the public will go on, as scheduled, despite recommendations to shelve it by a parliamentary committee last week.

Finance minister, Mr Amos Kimunya, said only Parliament could stop the mobile phone service provider’s Initial Public Offer (IPO) by debating and making a Public Investments Committee report binding. "The process is in full course and we expect the exercise to be over by the end of October," said Kimunya.

And the minister declared that nothing would stop the Government from proceeding with preparations for the IPO, billed to be largest so far at nearly Sh34 billion for a 25 stake in the phone services provider. In a report tabled in Parliament last week, the Parliamentary Investment Committee (PIC) recommended a delay of Safaricom’s IPO of a 25 per cent stake until its ownership is clear.

"I would like to assure Kenyans that the IPO is on despite the report from the PIC," Kimunya told the Press after a leaders meeting at Engineer Town in Kinangop. He added: "We have finished a very successful Kenya-Re IPO and I can assure all that nothing will stop the Safaricom one".

A murky case of grand corruption

The PIC had recommended investigations to be conducted both locally and internationally. It said the Director of the Kenya Anti-Corruption Commission should investigate the circumstances and manner in which 10 per cent of Telkom Kenya Ltd’s shares in Safaricom were irregularly transferred to Mobitelea Ventures without the consent of the Treasury.

It has also recommended that Parliament invite the Organisation for Economic Cooperation and Development (OECD), United Nations (UN), Transparency International and the Serious Fraud Office of London to investigate the apparent grand corruption allegedly conceived and orchestrated by Vodafone Plc in Kenya.

Safaricom has, however, rejected accusations by Parliament that it harbours an undisclosed third shareholder and should be investigated before going ahead with the floatation. Chief Executive Officer Mr Michael Joseph on Friday contradicted the watchdog’s findings. "Safaricom has only two shareholders. These are Telkom Kenya and Vodafone Kenya Ltd. We do not know of any other shareholder," he told journalists. "The plans for the IPO will not be affected," he said, adding that he welcomed further investigations.

The mobile operator is the most profitable mobile operator in Kenya, with an estimated market capitalisation of about $2 billion. If the stake is sold on the Nairobi Stock Exchange later this year, as planned, it would be the largest IPO on the bourse. Safaricom had recorded a pre-tax profit of Sh17.2 billion ($258.3 million) for the year ending March 31, up 40 per cent on the previous year.

PIC described the ownership saga as "a murky case of grand corruption". It alleged that share movements within the company appeared to have been a conspiracy by Government officials, Mobitelea Ventures, Vodafone Plc and Telkom Kenya Board to defraud the public of a stake in Safaricom.

The committee said that neither the management of Safaricom nor that of Telkom could produce the written request by Vodafone asking for increase from 30 per cent to 40 per cent. This was further affirmed by the inexplicable disappearance of records of Vodafone Kenya Ltd from the Registrar of Companies in Kenya.

The report says that in 1999, Telkom Kenya owned 70 per cent of Safaricom Ltd while Vodafone Kenya Ltd owned 30 per cent. Contrary to what is known to the public, the mobile telephony company has a third shareholder in the name of Mobitelea Ventures Ltd whose shareholder is a firm registered in Guernsey Island and whose directors are obscure through other nominees.

The firm owned 10 per cent of Safaricom by 2002, which was reduced to five per cent in 2003 when Vodafone Plc "bought" back part of the shareholding. The committee reported concern that Telkom Kenya was not paid anything for the 10 per cent of Safaricom that was irregularly ceded to Mobitelea.

Most witnesses who appeared before the committee, including the Ministry of Finance, were not certain about the dates of the reduction of Telkom’s shareholding from 70 to 60 per cent. While the Treasury Permanent Secretary informed the committee that the reduction was done in October 5, 1999, the Communications Commission of Kenya Director-General said that by the time Safaricom was issued with a licence on June 30, 1999, Telkom’s shareholding had reduced to 60 per cent.

Mr Gavin Darby, the chief executive officer of Vodafone Americas, Africa, China and India, told the committee that the change was done in 2000, while minutes of Telkom Kenya board showed September 27, 1999 as the date the board approved the reduction of shares subject to written request by Vodafone. It was evident that Telkom’s board neither obtained the requisite sanction of the parent ministry nor that of the Finance ministry.