Nairobi — Public companies are promising shareholders greater value from money saved in the ongoing shift to electronic communication.

The firms that have taken to sending shareholders electronic copies of financial statements via e-mail and using mobile money transfers to pay dividends are saving millions of shillings in investor relations budgets which they say is being ploughed back into the businesses to grow profits.

Safaricom, Kenya's top mobile operator with the highest number of shareholders blazed the trail last year when it held a no-frills annual general meeting in Nairobi and used its popular mobile money transfer platform M-Pesa to pay dividends.

The shift has been made possible by a 2007 repeal of the laws governing investor relations following the roll-out of Kenya's biggest initial public offering (IPO) - Safaricom.

A number of large listed companies at the Nairobi Stock Exchange have been moving to the electronic communication platform following in the footstep of Safaricom that has twice used its wide M-Pesa network to pay dividends and published its financial report on the internet.

KenGen, Mumias Sugar and Scangroup are among the listed firms that have amended their articles of association and gone electronic reducing their investor relations budgets by millions of shillings.

KenGen is one of NSE's companies with the largest number of shareholder and has in the past spent more than Sh25 million on annual reports alone, and a further Sh17 million on postage to 250,000 shareholders.

Though the company has had its version of the cost-cutting measures, the search for cheaper and more efficient means of holding AGMs, communicating with investors and paying dividends remains the cross-cutting theme.

But even as listed firms wallow in the huge savings they have been able to make using the new methods of communication, the NSE's estimated four million investors - used to receiving hard copies of the annual financial reports and dividend pay cheques from the post office -- have been asking what is in it for them.

"Savings made from this and other investor relations functions are ploughed back into the business to grow profits and increase shareholder value," said Les Baillie, the chief officer in charge of Investor Relations at Safaricom.

Kenya Airways last week jumped into the cost-cutting pool with publication in the print media of an abridged version of its annual report and announcement to shareholders that it will use electronic funds transfers, including mobile money to pay dividends for the financial year ended March 2010.

This means that the airline will significantly cut its printing budget and the millions of shillings it had set aside for posting the annual reports to investors.

Use of mobile money transfers to pay dividends also means that KQ saves part of the costs it incurred writing and posting cheques to the more than 100,000 investors in its register.

"Companies with large registries of more than 100,000 shareholders are particularly keen on cutting costs," said Zena Ahmed, a share registrar at Image Registrars that serves more than 63 per cent of all shareholders of companies listed at the Nairobi Stock Exchange.

"This trend began with Safaricom last year and is now spreading to other big firms after amending their articles of association," she said.

Company registrars say the new methods of communication will also help companies reduce wastage they incur every year with the return through the post office of thousands of annual reports and other documents sent to the wrong shareholder addresses.

As the listed companies count their gains, analysts warn that these new methods of managing investor relations are squeezing life out of auxiliary businesses that depend on the old model for revenue and profits.

"The change from heavy to thrift spending on investor relations means companies that benefitted from the supply of services and goods to the listed firms must change strategy to remain in business," said Eric Musau, an analyst at African Alliance Investment Bank.

Top in the list of losers is the Postal Corporation of Kenya and other courier companies that earned millions of shillings from physical transportation of financial reports and dividend cheques to local and foreign investors.

The number of letters sent by courier services in the first quarter this year dropped by 35.7 per cent to 73,162 compared to the fourth quarter of 2009 while the volume of letters that the postal corporation handled fell to 23 million from 25 million last year, according to the Communications Commission of Kenya (CCK).

Former Finance minister Amos Kimunya repealed the regulations governing investor relations in his 2007 budget speech citing the then rapid expansion of the retail investor pool that would signalled huge growth in investor relations budgets and eroding the value of dividends.

Safaricom, for instance, has the highest number of shareholders, comprising of more than 700,000 local individual investors earning less than Sh200 in annual dividends.

Since last year, the company has used its mobile money transfer M-Pesa to pay dividends worth less than Sh35,000 saving investors part of the losses they incur in cheque based transactions.

The Central Bank last year deepened this shift from cheque based transactions with the publication of new regulations that provide for mandatory use of electronic payments for any transactions exceeding Sh1 million, piling revenue pressure on cheque printers.

The number of electronic money transactions jumped from 24,552 in September to 55,440 a month after the new rule came into force while the value of transactions rose to Sh1.4 billion from Sh1.1 billion.