Kenya's telecommunications giant, Safaricom, gained Ksh4 billion (about $40 million) market capitalisation on the first day of trading after appointment of a new chief executive, offering a glimpse into investors’ early assessment of the management change.
Safaricom on Thursday evening announced the appointment of senior Diageo executive Peter Ndegwa to replace the late Bob Collymore at the helm of East Africa’s most profitable company.
It is the first time that a Kenyan will be heading the 19-year old company, whose market capitalisation climbed to Ksh1.149 trillion (about $11 billion) following the announcement that saw its share price rise to Ksh28.70 from Thursday’s average close of Ksh28.60.
Mr Ndegwa will take charge of the Nairobi Securities Exchange-listed firm on April 1, next year.
“We are confident that Peter will carry on our vision of transforming lives while keeping us focused on meeting our customers’ needs and holding us to our new commitment of being simple, transparent and honest,” said Nicholas Ng’ang’a, the Safaricom chairman, while announcing the appointment.
Safaricom has been under the stewardship of interim chief executive Michael Joseph since July following the death Mr Collymore.
The appointment calmed uncertainties that had surrounded the hiring of the next boss of the biggest company in the region.
The Kenyan government, which controls 35 per cent shareholding of the company, had said it wanted a Kenyan to head the telco.
South Africa’s Vodacom has a 35 per cent stake in Safaricom, UK’s Vodafone five per cent, while the rest is publicly traded at the NSE.
Analysts see the appointment of Mr Ndegwa, who has vast experience on the global front, as a statement that Safaricom is gearing for its next phase of growth that entails expanding its business beyond the Kenyan market.
The company is mulling entry into Ethiopia through the acquisition of a stake in State-owned Ethio Telecom, which has announced the sale of shares through a privatisation plan.
Safaricom is also actively involved in strategies to grow the money transfer service, M-Pesa, on the international arena and is in the process of acquiring the intellectual property rights from Vodafone to enable it roll out the service across Africa.
“The appointment of Mr Ndegwa cements the expansion strategy to new markets particularly across Africa,” said Gerald Muriuki, an analyst at Genghis Capital.
He added that Safaricom can no longer depend on the Kenyan market to maintain its steep profit growth at a time when its market share in terms of mobile subscribers and voice business is on the decline.
Communications Authority of Kenya data shows the company’s mobile subscribers declined to 63.5 per cent in the full year ended June from 65.4 per cent the previous year.
Its closest competitor Airtel, which is in the process of finalising a merger with Telkom Kenya, saw its market share rise to 24.6 per cent.
With voice revenue returning flat growth in recent years, Safaricom is banking on data and M-Pesa to maintain growth.
In the financial year ended March 2019, M-Pesa revenues grew by 19.2 per cent to KSh74.9 billion ($740.7 million) with voice service revenue growing by 0.3 per cent to Ksh95.9 billion ($948.43 million).
The company posted a 14.7 per cent increase in net profit to Ksh63.4 billion ($628.2 million).
A former finance director at East Africa Breweries Limited, Mr Ndegwa who holds an MBA from the London Business School was plucked from Diageo Plc where he is the managing director of Diageo Continental Europe, overseeing 50 countries.
He had previously served as chief executive of Guinness Nigeria and Guinness Ghana Breweries where he transformed the two operations to deliver double-digit growth.