The telecommunications sector is seen by investors as a slot machine. When you have a chance, like Safaricom, of having a new operating license, it attracts. However, the risks of a financial bubble exist in this case.
The Kenyan Safaricom, the first market capitalization of the Nairobi Securities Exchange (NSE), has attracted many foreign investors, since the group took the head of a consortium currently competing for a telecommunications license in Ethiopia. 48 million of its securities were traded the week of April 30, 2021, with a 65.3% participation of foreign investors in the transactions.
Its market capitalization has reached nearly 1.6 trillion shillings ($ 5.6 billion). This is its highest level since the company was listed on the Kenyan financial market on June 9, 2008. This situation also makes it the third largest company in the telecommunications sector in terms of stock market valuation in the Africa and Middle zone. -Orient (MENA). It is thus ahead of Vodacom, MTN Group and even Airtel Africa, which have a much larger geographic presence in Africa.
Since the start of 2021, the value of Safaricom’s share has risen by 81% taken in Kenyan shillings, thus posting the best performance of listed companies in Kenya. Obtaining the license in Ethiopia would make it a more income generating machine, in a country of nearly 90 million people. At the moment, the company has the best stock market profile on the NSE, with a return on assets of 46.7%.
But there is a risk of a bubble. The company competes in Ethiopia with MTN, one of the industry leaders in Africa. If the license does not pass for Safaricom, its value could plummet, because in terms of revenue, the company generated only $ 2.35 billion over the 12 months ending in September 2020, according to reports. data from Capital IQ, the data arm of S&P Global Ratings. It ranks the 18 th place of the MENA region, with a market value that represents 23 years of profits made in US dollars.