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Safaricom IPO – Africa’s landmark listing:

The Company has the benefit of experienced shareholders, attractive tariffs, a nationwide network of experienced and effective dealers and customer service, a modern network and high calibre management, enabling it to maintain its position as Kenya’s mobile market leader.

The following table presents the Company’s number of subscribers, revenues, EBITDA and blended ARPU for each of the last five fiscal years and the six months ending 30 September, 2006 and 2007.

History

Telkom Kenya acquired a 60% interest in Safaricom by contributing its ETAC and GSM network and subscriber base valued at US$30 million. It subsequently lent Safaricom US$33 million as its portion of the US$55 million fee that Safaricom paid for its Kenyan cellular license. Vodafone Kenya Limited acquired a 40% interest in Safaricom by contributing US$20 million in cash. It subsequently lent Safaricom US$22 million as its portion of the fee paid by the Company for its initial license.

On 20 December, 2007, the GoK purchased Telkom Kenya’s entire shareholding in Safaricom. Consequently, as of the date of this Prospectus, Safaricom is owned 60:40 by the GoK and VKL.

Vodafone
Safaricom has benefited and continues to benefit, both in terms of customers and market capitalization, from the extensive experience of Vodafone, the world s largest mobile telecommunications company. Vodafone has extensive international and operational experience in 25 countries, including a number of emerging markets.
Vodafone is the world’s leading international mobile communications group by revenue, with over 252 million proportionate customers as at 31 December, 2007. Vodafone currently has equity interests in mobile networks situated in 25 countries, with a significant presence in Europe, the Middle East, Africa, Asia Pacific and the United States.
Internationally, Vodafone has built a highly regarded portfolio of GSM and 3G licensed businesses.
Vodafone has demonstrated its operational and competitive strengths across many markets, and developed leading operators in terms of market share and competitive strength in many of its mobile investments. Vodafone has an Egyptian operating company and Vodacom, in which Vodafone holds a 50% equity interest, has operations in Tanzania, Democratic Republic of Congo, Mozambique, Lesotho
and South Africa.

Competitive Strengths
The Company believes that the following strengths will enable it to maintain and enhance its position as the leading provider of mobile communications services in Kenya:

Established presence in the market. Leveraging the Company’s price and products, coverage (including rural area coverage exceeding that of its competitors) and quality, customer service, brand awareness and distribution infrastructure, Safaricom has solidified its market leading position.

Strong brand affinity. Safaricom enjoys strong brand recognition in Kenya. The Company has focused on enhancing its image by involving itself in the community and focusing on local themes, which may resonate with the targeted customer base.

Ability to anticipate and react to customer needs and product offerings. Recognizing that its customer base is diverse (i.e., corporate v. individual, urban v. rural, wealthy v. poor), the Company has a history of introducing innovative products and services (most recently, M-PESA) designed to meet its current subscriber needs and the anticipated needs of future subscribers. Such products and services include introducing per second billing, offering low denomination airtime vouchers, distinguishing between peak and off-peak tariffs, offering lower pricing due to on-net advantage, and avoiding hidden charges (e.g., set-up fees).

Ability to react quickly to competitive threats. The Company regularly scrutinizes competitor activities and promotions from public sources so that it can react quickly and effectively to competitor offerings/promotions to retain market share.

Effective retail distribution network. The Company has a vast distribution network (including direct and indirect channels), thru established dealers, which permits the Company to market its products and services to customers more easily, enables the Company to further enhance its brand recognition and facilitates its ability to meet customer demand for its products.

Modern network infrastructure. The Company is able to offer wide-ranging network coverage due to its extensive infrastructure. See Network below for further information.

Business Strategy

Against the background of a growing telecommunications market in Kenya, in part stimulated by favorable economic and demographic conditions, Safaricom s goal is to retain its leading position in the mobile market as the provider of choice, while maintaining and growing its profitability. The principal elements of the Company’s business strategy are:

Maintain Market Leading Position. Growth in the subscriber base is expected to continue for the next few years. As the mobile market grows, the Company is focused on maintaining and strengthening its position as the leading provider of communications services to the Kenyan mass market.

Capture Potential of Data Market. The usage of telecommunications data services in Kenya is currently relatively low compared to many other countries. As a result, the Company may have significant growth potential. In order to exploit potential growth opportunities, the Company aims to take advantage of the opportunities to gain subscribers that are afforded by new technology. For example, the Company s recent acquisition of a 3G license will permit the Company to offer enhanced data products.

Increase Penetration of New Products. The Company’s growth strategy is focused on identifying and meeting the needs of potential and existing subscribers by offering new products with mass appeal. If this happens, it will not only improve the Company’s product range, but could lead to an increase in ARPU. Critical to the success of a new product is the Company’s ability to expand its usage. In this regard, one of the Company’s priorities is to expand coverage for M-PESA, the Company’s recently launched mobile cash transfer system, both in terms of subscribers and retail presence.

Provide Best Quality Service for Offered Products. In Kenya, the telecommunications industry has encountered difficulties providing services to its customers, given the existing infrastructure and demand. Recognizing that improvements can be made, Safaricom aims to continuously increase network capacity and secure transmission between switches in order to stay ahead of consumer demand. In addition, the Company seeks to improve network quality, as demonstrated by its recent acquisition of a 3G license, which will provide increased spectrum availability and capacity in key areas, such as Nairobi.

Be a Leader in Corporate Responsibility. In addition to making an effort to identify with the local community through its branding, Safaricom allocates funds for the purpose of community development and support initiatives, focusing particularly on small localized youth initiatives to benefit recipients directly. Examples of such activities include tree planting activities and sponsoring local sporting events. The Company has a strong history of providing support for local organizations, demonstrated by the establishment of the Safaricom Foundation in 2003. The Safaricom Foundation is a public charitable
trust focused on sharing the benefits of mobile communications technology as widely as possible, protecting the natural environment and supporting communities.

Source: Safaricom Prospectus
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