Mobile service operator Safaricom has reported a Ksh55.4 billion ($554 million) net profit for the financial year ending March 31, 2018, lifted by revenue growth in the voice and mobile money segments.
The telco weathered the potential impact of the 2017 election dispute in Kenya, in which the opposition called a boycott of its services, and the slowing of the economy, to post a 14.3 per cent growth.
In the same period in 2016/17, the telco listed on the Nairobi Securities Exchange (NSE) reported a Ksh43.5 billion ($435 million) profit.
The Kenya government and South Africa’s giant telecoms firm Vodacom, which jointly own 70 per cent of the firm, will receive the lion’s share of the total dividend of Ksh44.1 billion ($441 million) or Ksh1.1 ($0.01) per share.
The British multinational Vodafone Plc, through its subsidiary Vodafone Kenya, owns five per cent after ceding 35 per cent shareholding to Vodacom in 2017. The Kenya government owns a 35 per cent stake.
According to the audited financial results, Safaricom’s total revenues grew 9.8 per cent to Ksh233.72 billion ($2.33 billion), from Ksh212.89 billion ($2.12 billion) the previous year, riding on its 29.6 million customer base.
A huge chunk of its revenues — Ksh158.55 billion ($1.58 billion) — came from voice and M-Pesa services, with voice contributing over 60 per cent — Ksh95.64 billion ($956.4 million).
The firm made Ksh62.9 billion ($629 million) from transaction fees it charges customers on money transfer and payment services through the M-Pesa platform.
Last year, Voice and M-pesa contributed Ksh93.46 billion ($934.6 million) and Ksh55.1 billion ($551 million) respectively to the firm’s top line.
Mobile data revenues grew to Ksh36.4 billion ($364 million) from Ksh29.3 billion ($293 million) in the same period in 2016/17.
Other key contributors to the firm’s revenues were SMS at Ksh17.72 billion ($177.2 million) and fixed data at Ksh6.67 billion ($66.7 million).
The firm saw the value of its stock rise to Ksh29 ($0.29) per share, from Ksh28.25 ($0.28) before the announcement of the record profit.
Its earnings per share grew to Ksh1.38 ($0.013) from Ksh1.15 ($0.01).
Last year, South Africa’s biggest mobile phone operator Vodacom bought a 35 per cent stake in Safaricom for $2.6 billion.
Even though the 11-year old M-Pesa service has taken root in Kenya and spread in the region, it was abolished in South Africa in 2016 due to poor uptake because the service does better in markets that are less developed in terms of formal banking.
It is understood that Vodacom plans to introduce it to many of its 66.8million African subscribers.
Vodacom offers mobile services in five African countries, Tanzania, DRC, Mozambique, Egypt and Ghana.
Push to split the business
Safaricom has grown to become the most profitable company in the region. There had been a push to split the business, with the aim of making M-Pesa an independent unit, but the Communications Authority of Kenya (CA) announced in January this year that the plan had been dropped.
Safaricom had initially been labelled a dominant operator, which called for the separation of its voice and mobile money units into stand-alone businesses to compete with rival telecommunications firms.
Analysts at the UK-based research firm Exotix Capital had predicted that Safaricom’s revenues would be impacted by a slowdown in M-Pesa and voice revenue after the boycott call by the Kenyan opposition and the slowing economic environment in the second half of 2017.
“We have cut our 2018 EPS and EBIT forecasts by seven per cent and eight per cent respectively, to Ksh1.24 ($0.012) and Ksh73 billion ($730 million), as we factor in a slowdown in M-Pesa and voice revenue following the impact of the boycott and the slowing economic environment in H2,” said Exotix.
“We see downside risk to our forecasts from the implementation of dominance regulations on data revenue as well as the proposed increase in mobile money transaction taxes on M-Pesa revenue.”
Data from the CA shows that Safaricom lost three percentage points of data traffic market share to Airtel in the three months to December 31, 2017, closing at 73 per cent, compared with Airtel’s 19 per cent.
“We attribute this mainly to the boycott in the quarter, but we are cautious of increased competition in the mobile data space,” said Exotix.
In the same quarter, Safaricom’s rivals Airtel and Telkom halved their 1GB data prices to Ksh250 ($2.5), while it maintained its bundle at Ksh500 ($5)
“Although Safaricom still offers a superior network experience, we think that Airtel’s data offering in the metropolitan areas at a lower pricing could impact Safaricom’s market share, especially for the lower-income customers,” said Exotix.
During the period Safaricom posted a 69.1 per cent market share in mobile subscriptions marking a decline of 2.8 percentage points when compared to 71.9 per cent recorded during the previous quarter.
The market shares for Airtel Networks Ltd rose to 17.2 per cent from 14.9 per cent recorded during the previous quarter. Telkom Kenya Ltd gained 0.6 percentage points to register a market share of 9.0 per cent from 8.4 per cent posted in the previous quarter.