Celtel Zambia: Prospectus Peek

After taking a peek at Safaricom prospectus, take a look at the Celtel Zambia one (Thanks M for mailing it in) with two weeks to go in the calendar.

January 2008, showed that cross-border diversification may not be a bad thing, even for Kenyans - and if you have the money and the chance, you should do it. Stanbic Uganda has performed quite well, though the weakening Uganda shilling eats into improved dividends.

In this IPO, retail investors from outside Zambia are not included, nor are there provisions for other country nationals except as international institutional investors. For Kenyans who take part, we are one of the countries who have double tax treaties with Zambia – hence reduced tax on dividends. However Celtel has never paid dividends as it has ploughed back all profits into operations.

Comparing mobile giants: it’s best to compare Celtel Zambia to Safaricom Kenya as they are both market leaders and backed by multinational mobile partners. Zambia is larger than Kenya, but with about 1/3 of the population (12 million) Celtel Zambia has about 1.9m customers representing 78% market share and covers 71% of the country (Cell Z and MTN are competitors). It had 2007 revenue of $252 million and an average monthly ARPU of $13 - similar to Safaricom’s (~800 shillings per month).

Beneficiaries: While the benefits of safcom went to the Kenya government, the benefits of this (sale of 20%) will go to Celtel parent. Stanbic bank are also going to do well as lead manager, distribution agents and one of the receiving banks. IFC owns 10% of the company and is expected to sell its shares after the IPO which itself costs about $5 million.

On offer: 1 billion shares on offer at 640 kwacha per share ($0.18 or Kshs. 11.50). The minimum subscription is 700 shares (about 8,000 shillings). Employees get a 20% discount on the price.

Directors: A Kenyan connection is former PS (part of 1990's dream team) and IFC executive Mwaghazi Mwachofi on the board of Celtel. It is refreshing got see that all directors other portfolios are listed in teh prospectus and that they have to declare that they have not censured/criticized by any regulator/ authority or been involved in bankruptcy, or liquidation.

Management fees: The company pays between 3.6% and 4.8% of annual revenue to Zain/Celtel parent. Safaricom pays Vodafone 0.5% of revenue and 6% of procurement costs as what has been a sensitive issue for the company but seems to be the norm with multi-nationals.

Stock exchange not retail or liquid: Zambian exchange appears not to be very liquid – it has 9 listed companies worth $100m, and $72m worth of deals were done last year in just 6,196 trades. The listing of Celtel should improve those numbers.