Editorial

The Government should come out and explain clearly the ownership structure of Safaricom Ltd. The Parliamentary Investment Committee (PIC) had last week recommended delaying Safaricom’s expected initial public offering (IPO) of a 25 per cent stake until its ownership is clear. Both the Government and Safaricom managers have said the company is owned 60 per cent by Telkom Kenya and 40 per cent by Vodafone Kenya ltd. Period.

However, the PIC says it examined at length the matter of Safaricom shareholding and reported that this was a matter "that members constantly and rightfully described as a mucky case of grand corruption". In 1999, Telkom Kenya owned 70 per cent of Safaricom Limited, while Vodafone Kenya Limited owned 30 per cent. But by 2002, a third shareholder in the name of Mobitelea Ventures Limited, whose shareholder is a shadowy firm registered in Guernsey Island and whose directors are obscure through other nominees, owned 10 per cent of Safaricom.

This was reduced to five per cent in 2003 when Vodafone Plc ‘bought’ back part of the shareholding. The committee is concerned that Telkom Kenya was not paid anything for the 10 per cent that was irregularly ceded to Mobitelea. PIC says most witnesses who appeared before the committee, including Finance ministry officials, were not certain about the dates of the reduction Telkom’s shareholding.

There were discrepancies on dates of change of ownership between the Treasury, Telkom Kenya, Communications Commission of Kenya and Vodafone Plc. The latter owns Vodafone Kenya. PIC alleges that share movement within the company appeared to have been a conspiracy by Government officials, Mobitelea Ventures, Vodafone Plc and the Telkom Kenya board to defraud the public of its shares in Safaricom.

The committee said that neither the management of Safaricom nor that of Telkom could produce Vodafone’s written request asking for an increase of shareholding from 30 to 40 per cent. However, last Friday, Safaricom Chief Executive Mr Michael Joseph contradicted the watchdog’s findings. He insisted that Safaricom has only two shareholders: Telkom Kenya and Vodafone Kenya Limited. Where does the truth lie on all this? It is all too confusing to the public and to potential investors keen to out their money in the mobile telephone operator.

The company is the most profitable mobile telephony operator in Kenya, with an estimated market capitalisation of about $2 billion (Sh134 billion). If the stake is sold at 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. At the weekend, Finance minister, Mr Amos Kimunya, assured Kenyans that the planned Safaricom’s IPO would go on as scheduled despite the parliamentary committee’s recommendations to shelve it.

The minister said the flotation was on track — that the process is in full course and expected to be over by the end of October — and only Parliament could stop it after debating the PIC report and making it binding. In a serious matter such as this one, the Government should call a Press conference to explain to the public the status of Safaricom ownership instead of addressing the issue on the sidelines of other meetings. Treasury should also buy space in local media to explain the matter instead of wishing it away.