May the Real Owners of Safaricom Stand Up?

Real Owners:

The past few weeks, the local media has been awash with details that the Public Investments Committee (PIC) wants the government t0 institute proceedings to establish the real owners of Safaricom one of Kenya's most profitable telecommunication company that raked in 17B pretax profit for the last financial year. Information available at Safaricom's web show that its sharehodlers are Telkom Kenya and Vodafone Plc.

5% Stake:

This parliamentary watchdog wants the much anticipated Safaricom Initial Public Offer (IPO) slated for latter this year shelved due to the failure by recent investigations to unmask the owners of a shadowy company with a 5% stake in Kenya's most profitable firm.

This therefore means that the planned sale of 25% of Safaricom shares to the public through the Nairobi Stock Exchange that was anticipated to raise close to 34B may be put on hold until the owners of Mobitelea ventures are known.

Mobitelea Ventures:

This is a shadowy company that is alleged to own 5% of Safaricom though the company CEO was quick to scoff at the report claiming that the reals owners of the company are Vodafone Plc with 40% and government through Telkom Kenya with 60% shareholding. The report says that in 1999, Telkom Kenya owned 70% of Safaricom Ltd while Vodafone Kenya Ltd owned 30%.
Mobitelea Ventures Ltd is a firm registered in Guernsey Island and whose directors are obscure through other nominees. The firm owned 10% in 2002, which was reduced to 5% in 2003 when Vodafone Plc "bought" back part of the shareholding.

Registrars:

However, the evidence available from the office of the Registrar of Companies indicates that Safaricom's authorised share capital is 1,000 with;

-Vodafone Plc having 40%

-Telkom (K) Limited 60%

-Messrs Paul B. Julan, John K. Mosonik, Augustine K. Cheserem, Ashwini Bhandari, Kenneth Hamish Keith, each had one(1) non-participating share.

Shoromo Ltd:

Last year, it emerged that in February 1998, when Vodafone Plc entered the Kenya, the UK firm had used a pseudonym Shoromo Ltd and only changed its name to Vodafone Kenya Limited on October 15, 1998. More...

For the clearly illustrated shareholding structure check out pesa tu blog.

Scheme:

Many think the claims that the shareholding structure of Safaricom cannot be clearly identified is a scheme to defraud the public. Although as a requirement, companies intending to issue shares through an IPO through the Nairobi Stock Exchange (NSE) should reveal all the fundamental information, including shareholding, that would influence any investors purchase of the shares, this remains to be seen. Kenya Re didnot reveal the details of the forensic audit report claiming that it was sub judice to the court proceedings on the same only making them available for inspection at the company premises which many may not bother.

IPO still on:

The Government has said the sale of Safaricom shares to the public will go on, as scheduled, despite recommendations to shelve it by a parliamentary committee last week.

Anonymous Letter Alleges Improprieties at Equity Bank

Improprieties:
The last week was marked by revelations on the alleged improprieties at Equity Bank occassioned by a letter from an anonymous financial consultant and observed by Hon Khalwale among other M.Ps in Parliament.

Alleged Facts:
The anonymous letter Cpied to various concerned institutions) points out that millions of poor indigenous kenyans have been fraudulently robbed of millions of shillings through the listing of the banks shares at the NSE and gives the follows "facts";

Trade Bank Collapse:
1. James Mwangi, Equity CEO was the Finance Manager at Trade Bank, and part of the senior management team that supported Mr. Kassam before the bank collapsed with Billions of customer deposits.

Moved with Ksh 200M:
2. He moved with Kshs 200Million cash to Equity from the collapsed Trade Bank which he injected as capital supporting the resultant position of being the largest shareholder of the bank despite being only 42 years old.

Goldenberg Iquiry:
3. Mr. Mwangi was adversely mentioned inthe Goldenberg Inquiry.

Directorship:
4. From the above is he fit and proper under CBK guidelines to be a director of the Bank today?

30% shareholding:
5. He owns over 30% shareholding at the bank well above the 5% limit set by the CBK for a CEO, most of it in nominees accounts alleged held by the following members of staff:

Nominee Accounts:
Name: Designation: No. of Shares: Value:
Andrew Kimani General Manager 11.3M 1.6B
Mary Wamae Company Secretary 5.22M 730M
Gerald Warui General Manager 4.9M 686M

Bonus:
After the 2:1 bonus issue an employee earning kshs 400, 000 P.M would never build such a portfolio i nthe bank even in 200 years!

CBK and CMA?
How comes the CMA and CBK cannot see that they are just some of the nominees of James Mwangi?

Independent Directors:
6. Two Independent directors resigned from the board starting from the well respected Wanjiku Mugane of First African capital and now David Ndii citing serious corporate governance issues. Dr. Ndii is a highly respected development policy expert at the UoN with a PhD from Oxford University and previously worked at the world Bank.

Senior Staff Turnover:
7. Equity Bank has the highest senior staff turnover in the industry none stays for more than 1 year also citing serious corporate governance issues.

Exorbitant Prices:
8. The purpoted listing has been driven by the directors need to offload at exorbitant prices shares held in Asociate/Nominee names as their shares are bonded by CMA for 2 years hereunder for illustrations:

Dyer and Blair:
a) The principal shareholder of Dyer and Blair Investment Bank the leading broker on the shares is also a major shareholder of Equity Bank.

Kshs 70/Share Listing:
b) The listing was done at Kshs 70 Per Share, which was pushed to over 240 Per Share before huge bonus issue (2:1) ( capitalizing all revenue reserves) with subsequent share price then pushed to over Kshs 140 i.e. in simple monetary terms the value/ wealth of the directors has been multiplied more than 8 times in less than 1 year through the machinations at the NSE.

Front Running:
c) Clearly the share is being front runed/Spiked up poor kenyans are being duped to buy the share.

Industry P/E Ration:
d) Even the industry everage PE ratio of almost 60 times compared with similar institutions profitability base the share price at a reasonable industry PE of 15 should be around Kshs 30 Per share on the higher side but notKshs 140!

Hyped Media Bliss:
9. The hyped up daily unprecedented media bliss in Kenya's history is a cover up for all these fradulent activities to hype up the share price.

Unsustainable growth:
10. The bank is being pushed to grow at an unsustainable rate and indeed as observed by Hon. Members of parliament may go the same route Mr. Mwangi the CEO and friends of Trade Bank!
11. Former senior staff from CBK-Bank Supervision have been employed at the Bank to slow down any findings from CBK onsite inspection team.

Tip of the iceberg:
The letter alleges that this is only a tip of the iceberg and you may wish also to review how the Kshs 1Billion ICT, Branch expansion and overall procurement is being carried out that has prompted the 2 key directors and senior staff to resign; kenyans will be in for a big shock if you do not urgently intervene.

Yours Faithfully,

S.K. Patel

cc: -Governor CBK
-All fund Managers
-Commercial Banks
-Stock Brokers
-Capital Markets Authority
-PS Treasury