For their first AGM as a listed company, Safaricom will offer none of the fringe benefits that are typically expected: transport, lunch, goodie bag. It is not good shareholder value, says Chief Investor Relations Officer Les Baillie. Andrea Bohnstedt looks at the logistical and other challenges of Safaricom’s retail investor relations management.
It is going to be very much a bring-your-own-beverage event: Safaricom’s first AGM after the listing in 2008 will not include a free lunch, nor will participants receive the usual set of freebies: no t-shirt, no cap, no umbrella. And no free transport either. This is going to break some unspoken rules for AGMs in Kenya, but Safaricom Chief Investor Relations Officer Les Baillie is quite happy to do so: He says AGMs have turned into social functions and barely serve their original purpose anymore – to create a platform where shareholders can scrutinise the annual results and the company’s performance and interrogate the board about this. More importantly, however, he is concerned about the shareholder value.
With approximately 830,000 shareholders, Safaricom’s AGM is a logistical nightmare. Based on the experience of other listed companies in Kenya, the company currently estimates that around 30,000 people will attend the event. It will be held in the Kasarani stadium, the largest venue available. In the most stripped down version, the company expects to spend KES20m, a good part of this on security. Freebies, but also investor communications and dividend payments could easily increase this amount more than tenfold: Transport, lunch and the usual goodie bag for 30,000 people would add KES39m. If it had not been for recent legal changes that now recognise electronic means of communications, Safaricom estimate that they would have faced a bill of around KES239.5m for sending a print copy of the annual report to all shareholders. Then there are dividend payments: Estimated costs for traditional electronic funds transfers or cheque payments would be KES73m.
So Safaricom intend to cut out all the fun bits. The annual report will be available on the website, on mini discs, and in an abbreviated version, with all the information necessary to participate in the AGM, on the website. Full printed versions are available on request. The company will try to convince as many shareholders as possible to receive any dividend of less than KES35,000 by MPESA. Recipients will incur no charge, an issue that the Capital Markets Authority (CMA) also wanted to have clarified. Through these measures, Safaricom estimate that they will save up to KES351m, enough money to, for example, build 70 new base stations or pay 1.5 months of admin costs.
Perspectives
Other listed companies, Baillie says, are watching Safaricom’s first AGM closely, and have been very supportive: The size of Safaricom’s investor base may be a special case in the local market, but if the telecoms company can get away with the stripped down version of an AGM, they would try it, too. The logistical and therefore cost implications of the AGM should be obvious, but the detailed media briefing shows that Safaricom expect some public backlash especially for cutting out transport, lunch and other freebies. This appears contradictory – after all, the participants in the AGM should appreciate the fact that the management of the company that they own a share in are managing their affairs prudently.
If AGMs have become social occasions more than anything else (and the explicit no-lunch warning may also be an effort to serve notice to those who only come for the goodies), this also indicates a still relatively inexperienced investor public: Kenyans have participated enthusiastically in the IPOs of recent years, but many small retail investors had been attracted by windfall earnings rather than an understanding of what they are investing in Kenya: Investor Relations Management: Dealing with the Public. This was obvious especially in the Safaricom IPO where many people sold assets, and took out loans, in the expectation that the share price would shoot up.
On the other hand, the Kenyan government’s objective of spreading the ownership of Safaricom as widely as possible amongst small retail investors may have been publicity friendly, at least at the beginning when everyone was still excited about a stellar share price rise, but the burden on Safaricom has been substantial, as not just the logistics of the AGM show. The large number of small investors may also have held back the recovery of the share price as there was only limited liquidity in the market despite the international institutional investor interest Kenya: Unlocking Safaricom's Share Price.
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