Safaricom yesterday announced plans to invest KSh25 billion (US$296m) in network improvements and modernisation in a bid to improve its services and boost its share price after the board rejected share consolidation.
The plans were announced at the firm’s fourth Annual General Meeting (AGM).
According to Safaricom chairman Nicholas Ng’ang’a , KSh20 billion (US$238m) will be spent on network expansion and improvements, with the remaining money to modernise the telco’s equipment.
241 base stations in Western Kenya have been modernised, with Safaricom chief executive Bob Collymore saying that modernisation is important as it “has an impact on the quality of service”.
The AGM also saw shareholders raise concerns and query the board for a solution to the firms dwindling share price. Safaricom shares were valued at KSh4.15 on Thursday, down from a high of KSh6.2 in 2010 and KSh5.0 at the firm’s IPO in June 2008.
The Safaricom board has been seeking a solution to the low share price, though plans to consolidate seem to have been shelved. According to Old Mutual, “Share consolidation is when a company reduces its total number of shares in issue without reducing the overall amount of its share capital, by giving shareholders a lower number of shares of a higher nominal value which replace the shares previously owned by shareholders.
Ng’ang’a told the AGM that the legal difficulties and questions of funding were proving problematic.
“There is no solution that we have found that will not run against the law or require an external injection of capital,” he said. “We don’t see an investor coming in to rescue retail investors.”
The IPO saw Safaricom introduce 10 billion of its 40 billion shares to the NSE, as it wanted the company to be majority-owned by Kenyans. The government’s 25 percent stake was worth only KSh50 billion (US$592 million) while investors subscribed with over KSh226 billion(US$ 2.7 billion).
Some form of restructuring is still crucial to the strength of Safaricom’s share price, according to Ng’ang’a.
“To make a difference in the dividend in this company we must have a different structure of shareholding,” he told The Standard.