Safaricom–The most successful Start-Up in Kenya

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Safaricomâ€"The most successful Start-Up in Kenya

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Safaricomâ€"The most successful Start-Up in Kenya
safaricom house. Photo/Monicah Mwangi
safaricom house. Photo/Monicah Mwangi

Safaricom was formed in 1997 as a fully owned subsidiary of Telkom Kenya. It inherited 17,000 Customers. In May 2000, Vodafone Group PLC acquired a 40% stake and management responsibility for the company. in that same Year [2000] Michael Joseph began the Journey in earnest with five Vodafone employees in an apartment in the Norfolk towers in Kijabe Street Off Harry Thuku Rd in Nairobi. Today 18 years later, Safaricom has morphed into the biggest communication company in East and Central Africa, with over 29.57 million subscribers [as per the Full Year Earnings Release]. Its Mobile Money Platform MPESA [launched in March 2007] is ubiquitous and in fact its not a stretch to say it re-invented Kenya Inc.’s positioning world-wide. One Tweet from Bill Gates confirms its ubiquity and was probably worth the entire annual Kenya Tourism marketing budget.

‘’By making it easier to send and receive money, M-Pesa is transforming the daily lives of people in Kenya’’ @BillGates

Throughout its 18 year history, Safaricom has bet big on Kenyans. You might not recall but they were chasing Mo Ibrahim’s Celtel at the GetGo. In 2004, they launched the Mobile Internet. Whilst others built a mobile Internet that looked like a murram road, Safaricom built an Information Superhighway that connected us to the F uture, the World and the 21st century.

When Jack Ma visited Nairobi last year and was asked about the infrastructure deficit in Kenya, he said this [turning to Bob Collymore] ‘’But your internet is fast!’’

The Point is we live now in an Information Century and in order to be connected to a world of 7b you need a ‘’Maserati’’ connection otherwise You are not even on the Pitch. The word ‘’democratisation’’ is bandied around a lot but this one word that can be applied to Safaricom. Leadership at Safaricom from Michael to Bob have believed intuitively and instinctively in ‘’democratisation’’ That Belief has been evidenced consistently over its 18 years. Bamba 5 and Bamba 10 [scratch cards] are a clear example. These denominations were widely considered plain uneconomic. I remember a time when I set up my Company Rich Management and an FT Journalist scorned me in an article for the name telling me Africa is poor, what are you talking about and I said to her Africa is not poor its is unfathomably rich and its rich not because of what can be dug out of the ground but because of the People who walk upon the ground, the Human capital as it were. It is this which Safaricom understood and has consistently sought to unleash. And that is why KPMG methodology has shown that Safaricom’s contribution to the economy â€" at six per cent of GDP â€" is almost 11 times higher than actual profits.

I do reside in the business pages of the newspaper so let me now pivot to the share price because in a ‘’zombified’’ Nairobi Securities Exchange, Safaricom remains a Stand-Out and an Outlier. Over a ten year period, the share price has risen from 5 shillings to 23.75, that is a 375% increase. Add in the dividends over the period 4.77 [without factoring in the compounding effect which would juice it further] and Shareholders have enjoyed a +470.4% return. These returns rank in the top 1% world-wide.

Finally consider the amount of friction they have had to endure from the Regulator [whose Philosophy has been a kind of reverse Darwinism - the survival of the Unfittest] from the Government who have sought to Tax this every which way imaginable. As I scan the Stock Market and look at the Value destruction, the endless Ground Hog day of Bail-outs of ‘’Zombie’’ Companies, I am left wondering why we fail to appreciate that we as Kenya Inc. do not appreciate want 10 Companies like Safaricom not just one and why we fail to appreciate that in order for Kenya Inc. to thrive we need to bottle this magic Safaricom elixir and douse the entire economy in it. Safaricom closed at 23.75 on Friday. Frontier and Emerging Markets have been coming under pressure. This is good a [Re] Entry level that I can recall in at least 5 years. And if Bob has not been to see Abiy yet in Ethiopia, I propose to go on his behalf.

Aly-Khan is a financial analyst

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