Safaricom's Market Valuation Drops By Sh20 Billion in One Week of NASA Boycott

The market valuation of giant mobile service provider Safaricom has reduced by Sh20 billion in the first week of opposition National Super Aliance's calls for boycott of its products, Business Daily reports.

Some analysts however said the political action by the opposition was unlikely to negatively affect the firm’s share price in the longer term and they expect the company to continue registering positive revenue growth.

“There is only a small element of the boycott to Safaricom’s share price performance, attributable to investor sentiment. In our view, the slight drop is mainly due to a price correction after release of first half results, and precisely because the 9.5 per cent year-on-year profit growth was lower than anticipated,” Dyer & Blair head of research Linet Muriungi told Business Daily.

“We may, however, see subscriber growth either stabilise or soften marginally in the short term, where the organic growth in subscriber numbers is offset by those leaving.”

Ms Muriungi further said that the announcement by Nasa will only lead to migration of the subscriber base that accounts for small value monthly credit usage rather than premium customers who contribute the lion’s share of Safaricom's revenue.

Exotix Capital analyst Tracy Kivunyu noted the political uncertainty in the country mostly affects M-Pesa compared to other Safaricom revenue streams, and warns it could become a source of discomfort for the telco if it persists.

“While we expect a recovery in M-Pesa in the second half of 2017/18, we remain cautious of the political uncertainty coupled with the ongoing 90-day boycott of Safaricom services announced by the National Resistance Movement [wing of Nasa],” said Ms Kivunyu in a report released earlier this week.