Reading the Tea Leaves at Safaricom

Safaricom have published their >) annual report (download here). In a cost-cutting measure they will not be printing or mailing out these reports to their 829,000 reporters, nor will they serve any refreshments or give gifts at their annual general meeting in August 2009.


image from sambazanow

A to Z excerpts from the report

Performance Company had Revenue of 70.4b ($915 million) and a pre tax profit of 15.3billion ($198 million). Income was 59 billion from voice, 8 billion from data & SMS, but compared to 2008, growth is 8% and 80% respectively

M-Pesa - earned almost 3 billion from the money transfer system
- Vodafone hopes to take their money transfer model to other countries, though it has not fared well in Tanzania. Safaricom also hope to extend into international transfers from the UK via Western Union: it’s in test now (and hopefully will be cheaper than the current WU rates from UK to Africa )
- also plan to extend it to bulk payments (e.g. low end salaries in large organizations)
- agents now recruiting sub-agents

Directors - In September 2008, CEO Michael Joseph (US citizen?) joined the board, while Information Permanent Secretary Bitange Ndemo left the board. Kenya Government still has the Treasury and Privatization heads on the board.
- Susan mudhune joined the board and was rumoured to be the next chairperson to replace 70+ Nicholas nganga
- Both Michael Joseph and Les Baile have 2.35 million shares , chairman has 850,000, and privatization secretary Esther koimett has 637,000

Education working with JKUAT and Moi University on curriculum to get the graduates with the rights skills in telecommunications to join the company

Investment the company bought 51% of One communication limited a wimax service provider. One owns Comtec training & management (has local loop license) , Comtec Integration (has Digital carrier, network operation license) , and Flexible Bandwidth Services (has ISP license). One was technically insolvent. It had net liabilities of -66 million, but Safaricom paid 186 million for a stake in it after estimating it had goodwill of 219 million .

Licenses Safaricom has 5 licenses with a span of 15 years international operator license (1999), international gateway (2006) and 3G (2007). also acquired two more by buying into one communications – local loop operator, and date carrier network operation

Liquidity: Safaricom has trade payables of 11.9 billion, receivables of 4.3 billion, and cash of 4.3 billion . Their financial statements notes that current liabilities (35.3 billion) exceed current assets (17.3 billion) by 18.2 billion ($236 million), but that the company generates sufficient cash (about 30 billion) to meet operations; also that a significant portion of creditors relate to network expansion costs and this is expected to continue as long is period of intense network expansion, and they will borrow is there is s shortfall should auditors have emphasized this?

Media Crunch? Sales & advertising was 2.28 billon ($30 million), basically unchanged from the year before, and this was despite facing and expensive marketing campaign from rival Zain

Shareholders - Pension giants – national social security funds of Uganda ( 160 million shares) and Rwanda (96 million shares) are in the top 10 shareholders but Kenya’s NSSF is missing
- Has 465,000 shareholders who own less than 1,000 and while another 300,00 own less than 10,000 shares. The former will be getting dividend payments of 100 shillings($1.30), which makes the toll free payment y dividend a very smart option to apply for.
- No mention of mobitelea in report who recently exited from the shareholder register.

Submarine/Fibre Safaricom is a shareholders in Teams fibre optic cable system , it has committed 1.6 billion shillings ($21 million) , which it estimates will reduce cost of communication by up (Only) to 33% over 5 years

Tax Break Will pay 27% income tax for 3 years from march 2010 , instead do 30% since they listed. other Kenyan companies pay 30%

Motoring Moment: Bentley, Roundabouts, Crime

an occasional post about cars in Nairobi

The Boys are Back: (and some girls too) The TV nightly news have run a series of stories highlighting the re-emergence of crime in Nairobi targeted at vehicles, and not just when they are parked in unsafe spots. Thieves also wade through slow-moving traffic jams in the daytime looking to snatch handbags, cell phones from unaware motorist, or even pry loose indicator lights (which can cost Kshs. 5,000 or ~$65), external mirrors, hubcaps, or anything that meets their fancy and may fetch a price elsewhere. Because of the abundant re-sale market for car parts, Toyota and Nissan are the main vehicles targets, for indicator lights, but of late I’m also Mitsubishi’s, Subaru’s, and even a Mercedes looking like they’ve been to a motor dentist


picture taken during a replacement, not a theft

some advice
- keep windows reasonably up though its hot
- don’t have valuables in sight
- leave reasonable space between car in front (don't tailgate)
- be aware (don’t talk on the phone in traffic)

There are also other variations in crime , including people jumping on to slow moving cars to feign being hit (and later extort drivers claiming medical expense or quick cash settlements) or even crazier crime stories like this AK47 & technical that seems to be straight out of a Mogadishu playbook.

2009 Motorshow Total (Oil) Kenya have announced that the annual Nairobi motor show will be held at the end of August 2009. (some pictures from a past show (2007)). Great, now how about Nairobi also getting back the popular Air Show that stopped about three years ago?

Strange Cars: Robert Nagila, an NTV Reporter, went and dug out an old Rolls Royce (youtube video here) owned by the City Council of Nairobi , while eagle eyed @karuoro spotted a Bentley GT (twitpic) at the Village Market over the weekend.

Round about solution: Roundabouts are not popular with many Nairobians who believe they contribute to traffic jams. I, for one, believe they are a better option for Nairobi’s inconsiderate and careless drivers. Slate magazine has an article on story on roundabouts expalining why American should build more roundabout as they are safer than intersections. They are also more applicable to Nairobi since proposals to have huge freeways & fly-overs as envisioned in Vision 2030 drawings are far fetched as there is too little land available around the built-up and clogged Nairobi roads.

Garage Sale: The Government of Kenya has proposed a cutback in ministerial Mercedes and limousines, but Mars Group Kenya are not impressed by the proposed cost-cutting & tax raising sale measures.

Centum 2009 AGM

The Centum 2009 shareholders annual general meeting was held on Friday July 17 2009. Their last meeting I attended was 1½ years ago in February 2008 when ICDCI (changed its name) and became Centum. a quick Google search reveals other companies around the world with a similar name. So shareholders were right when they pushed for a more authentic, African name

AGM recap: From reading the minutes of the last shareholder meeting seems there was quite a bit of drama at the company’s last AGM in January where the independence of directors was questioned, and there were some interesting director elections whos resulted were polled and motions by some shareholders to remove two directors - (Chairman James Muguiyi and businessman Chris Kirubi) flopped. Most media reports however dealt with the delayed AGM and the payment of dividends at the door, but the best recap of that comes from the Nation

Bored this time: This was one of the longest AGM’s I have been to in a while. The Chairman and the CEO of the company each give long speeches about the company, that easily took up almost 2 hours - giving views on the performance of the company and future outlook as relates to the corporate bond they are about to launch.

Centum Performance their investment book is worth 6.5 billion (($84 million) down from 8.1 billion the year before. Reasons for decline were gains on disposal totaling 311 million, and further impairment of Rift Valley Railways (RVR) shares 271 million.
- The portfolio is consists of : 25% is KCB shares, General Motors East Africa 25%, Insurance 19%, 4% is publishing (a 35% stake in Longhorn), Beverages is 24% (includes shares in EABL, and several coca cola franchises), Services is 4% (includes 0.1% of Safaricom, and shares in NAS, and RVR), and 5% is a newly acquired (23% stake) of Carbacid . some values are KCB Kshs. 1.84 billion, GM 978 million, UAP 877 million, Nairobi Bottlers 660 million, KWAL 263 million, EABL 426 million, Mt. Kenya Bottlers 209 million
- Target is to have administrative costs at less than 2.5% of their assets. 2009 was 123 million (1.5%) and 2008 (136 million = ~1.6%), which includes cost of staff, running company, shareholder costs etc. striking a blow to companies that say public shareholders are expensive to administer
- On RVR: board maintains that it is still good company, had bad management. Once new deals are signed, new technical partners and this will see $50 million invested in the company. Fundamentals are still good, lots of foreign investor interest on the company, and it will be wrong to walk away when the value is down

Corporate Bond: Centum will be launching a corporate bond to raise Kshs 2 billion (~$26 million), reasons given include
- It’s the right rime, Safaricom and Kengen about to launch, while a recent bond from CFCstanbic bank was over-subscribed. After prospectus and approvals, it will be marketed to pension funds, institutions, insurance companies, even shareholders can subscribe
- Current borrowing costs at 170 million out of 6.5 billon assets are very manageable. Their dividend flows are not consistent, so they sometime need overdrafts, but can’t grow the business on overdraft. The Bond will add some long term funds to balance sheet
- They have a pipeline of investments lined up, and what is a bad market for others is a good time for Centum to buy into companies. Funds will be invested 60 – 70% in private companies, 20-30% in listed companies and 0.15% in real estate. They already signed the deal for Carbacid for about Kshs. 400 million that was done through Rasimu Limited, a new wholly owned subsidiary
- Bond is better than bank debt, cheaper, long term, more flexible. It will cost 9.5% to 12.5% per year

Image Centum plans to expand into Africa from Kenya and their vision is to be Africa’s foremost investment channel. Chairman mentioned that their name brand is important, and regretted that bad press had seen the share price dip

Voting: The voting was done by ballot, and the auditors will tally the results. So at the meeting, motions in the agenda were proposed and seconded, with shareholders asked to mark ballot forms and leave them outside after meeting for votes to be tallied. With the new registrars CRS, voting by this method could become the norm, especially on controversial votes, where shareholders numbers at the annual general meeting can be canceled out by real tally of proxy votes. That was the case at the January meeting, where the 1,536 shareholder attendees (with 258 proxies) tallied yielded just 1% in the re-election the directors.

Mindspeak with Professor Calestous Juma

The Nairobi lecture circuit has many forums which have yielded some interesting talks - such as from the leadership forum (run by British Council) that hosted Safaricom CEO Michael Joseph, and Nairobi Town Clerk John Gakuo, Kenya Alliance of Resident Associations (KARA), NCBDA which had British High Commissioner Edward Clay and also the Nairobist/tujuane entrepreneurship entrepreneurship series.

I made my first attendance at the Mindspeak series which had Harvard’s Professor Calestous Juma give a talk in Nairobi on July 17 2009. It was hosted by Aly Khan Satchu of Rich.co.ke and the professor was making a return talk to one he gave about a year ago.

The theme today was Rebooting the Economy – Technological Innovation & Africa’s Growth Prospects - on how Africa can use technological innovation to stimulate economic recovery, spur economic growth and spread prosperity. It was timed to coincide with the landing of the Seacom Fibre Optic Cable (to be launched ion July 23) which, at a cost of $700 million he called the largest foreign investment in east Africa since the Uganda Railway.

some notes from the talk in an A to Z sequence

Drivers of economic growth
1. Infrastructure – roads, electricity
- large continent of Africa has very little infrastructure (roads, railroad, power distribution) yet despite this has grown faster than most economies (except Asian) this has mostly been driven by mineral
- China has great interest in Africa minerals, but in order to move minerals, they also build up infrastructure, which is why African leaders have been cozying up to china. They are also admitting more African students to Chinese universities (building engineering capacity) and they always plan for these students to return to their countries
2. Technical education – build capacity in the engineering sciences
3. New business creation in the private sector

Technological abundance
- we must acknowledge technical abundance in a world today where technical knowledge doubles every 14 months now
- There are 880 satellites in space as at April 09, and cell phone use, GPS would not be possible. Also planned other3b network spearheaded by Google could go live in 2011 will cover most of Africa and the tropics a series of satellites design do
- first cell phone in Kenya cost as much as a 4 bedroom house in buru buru according to information PS bitange ndemo (then about Kshs. 250,000)
- What will Fibre will change? Right now it takes about 40 seconds download the wall street journal homepage from Africa, this will reduce to 15 seconds – and bandwidth cost which are as high as $8 per mbit in west Africa can’s compare to the $0.12 that US universities pay. Fibre also costs 1/10 to install compared to what it costs 10 years ago, and storage has gotten much cheaper (emergence of cloud computing, and OLPC has no hard drive).

technological advance are not just in IT but also other sectors

Education sector Links
excamples
- Moi University bought the (collpased) rivatex factory, and its now operating at 10% with the main challenge being lack of cotton. Move departments there, students spend time at factory, updating curriculum
- Pontifical catholic university of Rio de Janeiro has a genesis institute that is a business incubator – and they graduate companies alongside with their students
- Pohang Science & Technology University in South Korea is the best in Asia is an example of how business can create universities
- Kenyan ministries have training institutions that should be upgraded to universes (but only at post-graduate level so as not co compete with basic universities)
- Give young people technical literacy, such as with the $100(OLPC) laptop. Rwanda has become the global learning center for the OLPC, which was unfortunately bad mouthed by competitors which scared off other African leaders from embracing it

Energy:
- wind power can have great impact, and peaceful Somalia has the potential to supply a lot of wind power to the east Africa region, there are new wind power turbine and technology 9suc as Canadian Kite)
- solar also had great potential over next few years, and European countries plan to build solar farms in Sahara desert for their power, while Taiwan plan to launch a 1-passenger solar taxi later this year. Best technology for solar is from Israel engineers and firms, and African countries should learn from there
agriculture
- Genetically modified foods which resist pests, require less chemical and drought resistant (so far SA, Burkina Faso, and Egypt)
- advance in fish breeding, add a growth hormone (not GM) to salmon, and soon tilapia, and will see fish mature faster
- European countries concerned about GM foods are also big investors in that area, so African should target agricultural products that are relevant to Africa

Going Green
- used to mean paying more, but it is becoming pay less
- The future is sustainable, renewable energy, use of nano technology etc. Africa is not tied to polluting technologies and can start afresh using green technologies. e.g GM seeds – farmers don’t have to buy pesticides, don’t have to weed (turn over their farms) which means soils hold more carbon & moisture

Health
I.e. Africa has still very high maternal mortality
- Costs of ultrasound come down from $20,000, to $2,000 in a few years, and plans to cerate cell phone device that cost just $100 (and this is replacing the doctor’s stethoscope)
what do these mean for Africa?
These are not innovations unless they spread in the market place

Innovations Waves have occurred in the history of the world

1st 1785-1845: water power, mechanization, textile industry
2nd 1845-1900 steam power, steel industry, and cotton industry
3rd 1900-1950 electrification, chemicals, internal combustion engine
4th 1950-1990 petrochemical, aviation, space
5th 1990-2020 digital networks, biotechnology
6th ---- (should incorporate Africa, renewable energy, nano technology, Fibre)
With each, with the periods getting shorter and with more countries are drawn into the world economy each time if they utilize the chance to add knowledge to their economies (upgrade their software)

Military Links
Private sector can’t do it alone. African countries must explore us their militaries to do infrastructure - building roads, irrigation channels, dams, – they have the capability, discipline and knowledge (roman roads were build by the military)
- Military colleges should expand curriculum to be engineering colleges

Other aspects of growth
- venture capital – linking those with capital to those with ideas
- international trade – out exports under AGOA have been limited
- regional integration –enable close regional trade, otherwise we will not be bale to export to far countries
- Security – many countries spend a lot of productive resources on idle military. A controversial proposal was to embrace AFRICOM (whose tenets are defense, diplomacy and development), also equip diplomatic missions to identify emerging technologies that can benefit their countries.
- Executive dynamism – to link the business, academia and government to work together and transform economies. E.g. Rwanda has a minister of science who operate from the office of the president

Q&A
- How is Kenya doing? Creation of national economic social council (NESC) good start. Needs to be specific; many forums are held in Kenya achieve nothing because they are too general - and vision 2030 will only work if driven by executive not ministries
- How can Diaspora contribute to development? African absorptive capacity of Diaspora returnees is still low – countries need to have office dedicated to harnessing the efforts of their Diaspora to meaningful economic development, and also give those structures that resemble what they are used to. Kenya now has a Diaspora department in ministry of foreign affairs. Also don’t try and get Diaspora to contribute to Kenya simply because they are from Kenya - treat them as professionals, and shield them from petty politics
- Change from innovating in wants to needs like food, water, electricity? Professor argued that innovations like ultrasound, mobile phone, GM foods were no loner wants but needs
- Food production in Africa? president of Malawi was cited, took over as president at a time that country was in famine. Set out to fix sector, and controversially made himself minister of agriculture, shift in subsidy from consumers to subsidy of farmers enabled them to transform in two years and produce surplus harvest. Prof Juma that more African presidents should also hold the agriculture portfolio in charge of food security) later also became minister of research as he realized that country had reached limits of production under the current methods/processes
- How can Africa improve governance? Train our leaders (model institutions based on the Kennedy school) as some bad leadership comes from ignorance not malice. Also More information and transparency (media & exposure) will make corruption more difficult,
- How have other African countries (SA, Nigeria) used the fibre? Other countries have fibre in West Africa but business model was wrong, targeted at expensive customer and SAT3 has about 5% utilization. In this case give free access to bandwidth to universities to enable them to digitize their records. Wants to see a local animation industry in Kenya, wants to see Kenyan university lecturers teaching other countries on African history and culture to the Diaspora, beam signal right form here in Nairobi
- Any intellectual property rights in Kenya? Professor Juma and others wrote industrial property rights in Kenya yeas ago (KIPI)

Want more?
- Prof Juma has set up a multi-media centre in Kisumu with KCA University
- He will be a giving a talk targeted at the education sector on July 21 at the Kenyatta International Conference Center at 4 PM

Shaking up the Nairobi Investment Scene

Knocking Off Rogue Brokers

The Kenya Capital Markets Authority (CMA) has published new regulations that could knock off customer confidence in any small stockbroker still standing at the Nairobi Stock Exchange (NSE) as they have now become law.

Changes include:
- Sets minimum share capital for stockbrokers at Kshs. 50 million (~$650,000) and investment banks at 250 million (~$3.25 million) some stockbroker are investment banks in name only name
- Agents may work for one stockbroker only and may not handles client cash
- They must use International Financial Reporting Standards (IFRS)for reporting
- They must publish audited accounts and ½ year un-audited accounts in newspapers and also dispaly the same in their branches so by August 09 we should get a clearer picture of who's up or down
- They must obtain indemnity insurance
- They are to notify the CMA before appointment of executives, directors, and auditors as well as prior to branch openings/closing

Some of the proposal also affects investment funds, fund managers, and pension schemes. They were first proposed two months ago for public review and borrow a bit form existing central banks laws and are much harsher than when first formulated.

Other losers retail investors who lost their money in collapsed brokers (Nyaga, Discount, Francis Thuo etc.), it limits their potential compensation to just 50,000 shillings ($~650)

Winners - newspapers who will see an increase in quarterly advertisements from stockbrokers, investment banks, investment funds, fund managers, and pensions schemes.
- insurance companies (Stockbrokers and investment banks are to obtain professional indemnity insurance worth 5 times their daily average turnover)

Real Estate Moment

a series of real estate pieces

Real Estate Paradox: was with a real estate developer who’s looking to set up even more projects over the weekend; he talked about a paradox where real estate rental prices are dropping, while house prices continue to rise. Note: I’ve not seen signs of rental drops, but this probably applies to the developer’s current financial outlook when choosing to build for sale or to rent in Nairobi today


NSSF the Kenya National Social Security Fund NSSF continued a trend started last year of publishing their financial accounts. For the year to June 30 2008, they had of total assets of Kshs. 87.53 billion (~$1.1 billion), partially comprising 49% equity investments (43.7 billion), treasury bills & bonds (11.2 billion), and land & building 24% (20.97 billion) which was down from 29% the year before.

While NSSF’s investment income of Kshs. 5 billion was a 25% increase from the year before, poor returns in local shares at the Nairobi stock exchange have hit pension, fund, and insurance schemes leading them to seek greater returns and safety by investing in real estate. Yet the NSSF, because of its past association when it was a political cash cow and got saddled with unpalatable properties, is going against the popular grain, but has no choice even as it faces as long struggle to be viable safety net for retired workers.

Water shortage: dry water pipes in some Nairobi estates have been a pain to residents in some parts of town who have to buy water from vendors. Many construction sites even have to ferry in all the water they need by lorry seems to be a good business idea to have a water lorry now

Bricks & Banks: The new Equity Bank headquarters are now up in Upper Hill and UAP Insurance will soon be putting up a building in the area. On the Westland’s side its Southern Credit Bank and Standard Chartered Africa with new buildings about to be completed.


Cement & inflation: I’ve added retail cement prices to the inflation index starting with a 50 kilo bag of bamburi cement at 780 shillings (~$10).

S&L Gone: Savings & Loan is no more after KCB shareholders absorbed the subsidiary within the group structure as a cost saving measure. There was a nice (offline) article by Carol Musyoka in the Business Daily and she highlighted that S&L’s rapid growth was funded, not by deposits, but by funds drawn from parent KCB and wondered what return this was to KCB shareholders

Goodwill barrier: goodwill is a fee demanded by business owners from business tenants, shop owners etc. It’s a strange phenomenon; the fee, often as much a year’s rent, is paid before the building is even put up for the shop-tenant to secure space in the building. Another fee is paid each time a shop moves in or out of the building. This exorbitant business expense has put off many start ups and small business owners from renting or setting up shop in downtown Nairobi.


More articles on the goodwill phenomenon from Ghana, a Kenya forum and the Standard

How Safaricom can adapt Vodafone's investor relations

old safaricom logo incorporating vodafone

Safaricom have done a great job in terms of dealing with investor relations since its listing; they have also said there won’t be any SWAG for shareholders at their August annual general meeting (AGM).

But there are things that Vodafone can do that can enhance shareholder value beyond giving mere t-shirts and lunch boxes. As 40% owner of Safaricom, Vodafone can drive many things about investor relations. Consider that while Safaricom is considered to have too large a register with 831,000 owners, Vodafone is not too different with 551,000 shareholders - 440,000 who own less than 1,000 shares, and just 46% presumed to reside outside the UK. Despite the numbers, the Chairman's letter invites as many shareholders to attend the meeting and participate (and probably ward of any hostile resolutions)

So here are 10 things Safaricom borrow from Vodafone to enhance shareholder relations in lieu of SWAG:

1.Have an enhanced agenda and promote shareholder participation in management. Many NSE companies do the bare minimum asking shareholders to adopt accounts, approve auditors and re-elect 1/3 of directors – that means an AGM can take 15 minutes which leaves the floor open for the nonsense questions. With a ‘fatter’ agenda shareholders won’t have time to ask for trivia. Newer companies like Access Kenya, Equity, and Scangroup are more pro-active with the management of their companies. So decisions on acquisitions, fund-raising, are common on the agenda. Another examples is executive compensation: many companies ask shareholders to approve creation of employee share options plans (ESOP’s), but then leave the computation and awarding of benefits to trustees (another set of directors); at Vodafone, shareholders know and vote how much current CEO Vittorio Colao, and former CEO Arun Sarin earned, so why not let the shareholders know how much Michael Joseph and the directors earn per year per meeting etc. Can’t handle that? Uganda companies can do that. Also at Vodafone all directors retire each year, which should ensure a robust re-election session.

2. The complete 2009 Safaricom annual report will only be given to those who request it, to save costs. It will be downloaded from the website. So let’s have a interactive report so investors can choose to download video or just sections they are interested in e.g. the notice only. Same with the memo & articles

3. Promote a alternative methods for shareholders’ to enhance value. Support a dividend re investment program (DRIP). Not everyone wants an M-Pesa dividend; some may prefer to buy 100 more shares in the company instantly, while the shares are still cheap (Kshs. 3.7 or ~$0.05 per share) and a DRIP will be a useful tool that keeps cash within the company and its owners. Alternately, if feeling philanthropic, Vodafone shareholders may donate their meagre shares to a charity - and why not to a school in Kenya that was Tahidi High last night!

4. Broadcast a webcast of the AGM - this will be a showcase for safaricom’s broadband capabilities and will be enable foreign investors to participate. If not ,broadcast it on TV so people don’t have to travel to Nairobi from other towns and can watch have it from home – NTV or Citizen would cover the mid-morning event up to the 1PM news

5. Promote alternative voting ; by e-mail, by telephone, by mailing in the post; mail-in happens in Kenya, but Kenyan investors feel they have to be there, to vote which is not the case.

6. Send investors information by phone (SMS) or e-mail. Safaricom is a mobile phone company; they send trivial messages to advertise products, so why not also quarterly results by phone? And for those of us at the next level, why not Safaricom twitter ? Join @kenyaairways and @jimmykibaki (:_}) on the new media wave

7. Don’t leave everything to the share registrar: On the website, shareholders can track their shareholding, change their address, and change their dividend payment option. At the meeting have a shareholder help desk – already a common feature at bank AGM’s (Equity, NIC) but to help them transfer their shares to the bank. Online information use was a feature deployed during the IPO, but that information is sitting un-utilized in a server somewhere

8. Pre-empt shareholder questions with a FAQ. Compile a list of frequently asked questions with appropriate answers, put them on website, or hand out flyers for those who attend meetings.

9. The Vodafone site warns investors about boiler room tactics and cold callers after their shares. So why not tell shareholder which brokers are misbehaving? Which to use and not to use?

10. Vodafone governance policy calls for disclosure of any political donations (and for Safaricom if any) – it has been noted here that the company tends to have increased corporate social responsibility activities in the home areas of the sitting information minister

11. Oh, and finally Tea & coffee will be served at Vodafone AGM

Michael Jackson 1958-2009

Michael Jackson passed away a few day ago and is being buried today

Years ago I used to contribute to a fan site, because I was a fan of the man and his music. The business angle was fascinating touring, royalties, tax, and investments; it’s also where I learnt HTML basics in business school, and why blogging afterwards came much easier.

Yes his money & investments; there’s been much debate about his money, and where it went versus what his catalog is worth to his heirs. Where did the money go? Extravagant shopping, the entourages, the lawsuits, settlements, legal bills (he was probably the most sued individual in America - non corporate). He also attracted an endless circus of managers/advisors and toured the world with Byzantine proposals of an emperor gone mad. to put up Disneylands in Ireland, Bahrain, Korea, South Africa, with Prince Alwaleed, Don Barden, Sol Kerzner, Bahrain princes, Nation of Islam, etc.

He seemed to have no interest in making music or touring musically which is what many of his fans wanted. And when he tried, he said it was his final time. But was he going to enjoy it? Maybe not, but he had to do it.

I was also a fan of Mike Tyson and through his years in the wilderness in the 1990s I was always afraid that Tyson would end up having to fight in his middle ages, taking on young champs, not because he was still the champion or a contender, but because he needed the money. And from reading Randy Taraborelli’s biography “the Magic & the Madness”, even Michael Jackson was aware of Jack Johnson and other old boxers from decades before who had ended up as casino greeters in their old age. Was Michael Jackson at 50 going to be able to sing, dance, and perform in concert the way he last did 12 years ago? We'll never know now.

Whatever the reasons for his death, may he rest in peace. His music remains, and with careful management of his estate, his children could be provided for and he could have a prolific posthumous career in music and through film. He deserves one.

The photo and more stories are on the NY Times Michael Jackson page

Farewell Mobitelea

Contained in the fine print of the Vodafone 2009 annual report, is a note:

During the year ended 31 March 2009, under an agreement with Mobitelea Ventures Limited, the Group completed the purchase of a 5% indirect equity stake in Safaricom increasing the Group’s effective interest in Safaricom to 40%

M4Change Nairobi

The Mobile Tech for Social Change camp (m4change) was held last Saturday (June 27 2009) at Strathmore University Nairobi, and was staged by @afromusing and @jessicacolaco

More presentations and pictures are at the Wiki page, and these are my notes from attending a brief part of the talk on mobile applications in the morning

- With regard to mobile applications e.g. MPesa, (developers should) just create them, and let users sort themselves out e.g. a credit society that has 4 managers who are signatories, each one enters one (secret) digit of the society mobile PIN# to enable a mobile transfer transaction
- Wanahabari is a text to mobile application for journalists
- You can buy prepaid electricity via mobile phone in Rwanda
- Alternatives mobile browsers to opera include skyfire and mobileXL
- Safaricom is buying out leading developers in Kenya who may develop applications that compete with them (is that a bad thing?)
- While there is demand for Safaricom to avail an API for Mpesa, it is owned and controlled by Vodafone (UK)
- If you have an account at Consolidated bank of Kenya and others, you can use a mobile phone to transfer money from your bank account to your Mpesa account
- Fibre mirage?
(i) The cost of last mile connectivity in Kenya is still high e.g. one example cited was a quotation from a leading ISP in Kenya for $10,000 to extend the fibre just 300 metres
(ii) Even though fibre can make speeds more than 17X faster today, the ISP will only make gradual increments of 2X every few months to fool customers that they are always upgrading/improving
- There is no adequate consumer protection group/lobby in Kenya to agitate for better services. The communications commission of Kenya (CCK) regulator does not respond to consumers complaints
- Only Safaricom has a 3G license in Kenya (the cost is astronomical) and so far only deployed in Nairobi, Mombasa, Kisumu
- Safaricom has developed Mpesa bulk payment/transfer systems. Example given was to enable payments to farmers in Mt. Kenya region
- A great resource for mobiles in development is the CGAP site (World Bank)
- M-pesa heralds a shift from branch based banking to agent based banking with examples (at CGAP)
- Safaricom partnership with western union to enable transfers from UK to be sent to recipients mobile phones. Still being tested with safaricom employees, but will probably be as expensive as a regular western union transfer.

No SWAG from Safaricom

There will be no SWAG from Safaricom at their annual general meeting that will be held on August 19 - so the company boldly proclaimed in a media briefing on Wednesday.

Even while projecting that just 30,000 of their 830,000 shareholders to turn up, the company budgeted a total Kshs. 352 million (~$4.5 million for the event) which they cite as being too expensive. They even have compared the cost of the day’s events to be the equivalent to one month of all their leases, of 1 ½ months worth of administrative expenses – all channeled to a one day event!



Yet two things are clear:

1. Much of the burden is regulatory: They estimate it will cost Kshs. 240 million to print and circulate an annual report (Co-Op Bank, the most recent listed company has a 150 page report). Dividend will be distributed to shareholders, and they estimate that it would Kshs. 73 million to send these by EFT to a fraction of investors. Truth is most dividends and paid by cheque, very few by EFT.

2. SWAG generosity is not that expensive (but these are tough times): Kshs. 40 million for shirts, lunch, caps, and umbrellas is not much money for the company to spend, even if they don't provide transport to the venue (about 10 kilometers from town) . However these are cost-cutting times even at the largest companies. A few years ago, Nation Media Group (NMG) would hire buses to take their shareholders to their Nation AGM at their premises (beyond Jomo Kenyatta Airport) where they’d would have lunch and get some SWAG items. This year's event was at KICC in the middle of town (no transport costs) and shareholders only got copies of newspapers with their buffet lunch.

For Safaricom to take a harsh stance on SWAG is rather cold unless the directors and manager also adopt a similarly Spartan lifestyle e.g. no water for directors at the meeting and no breakfast /giveaways for media and institutional investors when they announce quarterly results. Still I expect a few thousand shareholders to turn up, not believing that there will be no SWAG

Hi Tech Cost Cutting: Safaricom is combating the high cost of annual general meetings and investor relations through technology

1. Annual reports will be downloaded from their website, which is probably the best in Kenya among NSE listed firms in terms of communicating with shareholders. It is updated constantly, even on the same day with CEO briefs to media and institutional investors.

2. Use M-Pesa to pay dividend. Odds are that most of their local 830,000 shareholders are also their (13 million +) customers; many will not have bought shares since the IPO – meaning their dividend cheques are perhaps just 20 shillings $0.25), so by employing M-pesa this will be a much cheaper channel than cutting and posting cheques for such small amounts.

The logistics of doing this are quire significant, it will involve partnering with the company registrar, perhaps the central depository settlement corporation (CDSC), and M-Pesa agents, to ensure each person gets their 10% dividend payment in the correct formula (a reversal will be a nightmare). Once this is done it will be an eye-opener for some of the other companies with large shareholder bases +50,000 including Kengen, KCB , Kenya Re , Mumias , Co-operative Bank and Kenya Airways who had a their loss-making year in a decade.

Other Development: The media release media release (PDF) also mentioned two recent developments at Safaricom:

1. Investor road show where they visited institutional and fund investors and talked in detail about the company in London (T Rowe Price, Genesis Investment, Charlemagne Capital, Marshall Wace, Renaissance Investment, Eton Park Capital, JP Morgan Chase, Aberdeen Asset, Henderson Global , ROBECO Group, Cyrte ), New York (EMS Capital, DWS Scudder, Morgan Stanley, Galleon Partners, McKinley Capital, Harding Loevner, Goodman), Boston (State Street, Wellington, Fortis ), Johannesburg (Stanlib, RMB, Visio) and Cape Town (Investec, Allan Gray , Coronation, Fairtree)

2. Their investment with Jamii Telecom which will include partnering in use of fibre in metro areas , and resale of excess capacity on TEAMS and Seacom, among others.

Read also ratio magazine Dont Come to Safaricom for Lunch post