Peter Ndegwa has started his tenure as Safaricom chief executive officer with a vote of confidence from investors after the company’s stock gained 1.7 per cent on his first day in office.
A day after the telco closed its financial year that ends on March 31, Mr Ndegwa heads a company that is the heartbeat of trading at the Nairobi Securities Exchange (NSE) and which must keep re-inventing to maintain its position as East Africa’s most profitable company.
Having posted a 14 per cent rise in net income to $597 million for the year ending March 2019, Mr Ndegwa is facing the uphill task of maintaining the mindboggling profits in an environment characterised by the challenges of coronavirus, flat growth in voice, slowdown in data market and scheming by the competition.
Mr Ndegwa, who took over from founding CEO Michael Joseph who has been acting since the demise of Bob Collymore in July last year, must also confront the reality that Safaricom’s dependence on the mobile service M-Pesa for growth continues to be a major gamble. Last year M-Pesa accounted for 31.2 per cent of the company’s revenue.
Although the clamour to separate M-Pesa from Safaricom to stem the company’s market dominance has since gone silent, the possibilities of revival allows loom larger.
Being the first Kenyan to lead the giant company, investor sentiments were upbeat at the NSE with Safaricom being the most traded counter accounting for 55.8 per cent of total turnover on April 1.
The company was trailed by KCB Bank and Equity Bank at 17.6 per cent and 15.9 per cent respectively.
“The telco was the only gainer in the top movers’ list, climbing 1.7 per cent on foreign trading,” said analysts at Standard Investment Bank (SIB).
At the NSE Safaricom, Equity Bank, KCB, East Africa Breweries, BAT Kenya, Co-operative Bank and DTB Bank dominate trading accounting for about 90 per cent of turnover. The gain saw Safaricom’s share price at the bourse close the day at KSh26.90 ($0.25) compared with KSh26.45 ($0.24) the previous day.
Safaricom gain was central in a mini-rally at the NSE after the market posted a fifth straight gain of one per cent with the NSE 25 share index and NSE 20 share index also rising marginally per 0.6 per cent and 0.1 per cent respectively.
In recent days, the bourse has endured severe erosion of paper wealth due to the effects of the Covid-19 pandemic with the benchmark NSE 20 share index plunging to a 17-year low last week.
In the first quarter of this year, the index has shed 24.2 per cent from 2600.41 points in January to 1966.12 points at the end of March while shareholder wealth has substantially been eroded after market capitalisation declined from $25 billion in January to $19.5 billion.
According to Churchill Ogutu, Genghis Capital head of research, Safaricom’s smooth transition that saw the share price go up on Mr Ndegwa’s first day in office lays the ground for share price stability in the coming weeks.