By JAMES ANYANZWA

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Mobile operator Safaricom’s net profit for the six months to September 30 declined by 10 percent as a result of a difficult operating environment characterised by high energy costs, high inflation, weakening currency and high interest rates, compounded by losses from the Ethiopian operations.

The Group’s net profit declined to Ksh27.18 billion ($180 million) from Ksh30.22 billion ($200.13 million) in the same period last year, weighed down by a net loss of Ksh14.43 billion ($95.56 million) from its Ethiopian investment, increased finance costs, and decline in revenues on voice business.

The group’s consolidated net profit of Ksh27.18 billion ($180 million) comprises a net profit of Ksh41.63 billion ($275.69 million) from the Kenyan operations and a net loss of Ksh14.43 billion ($95.56 million) from its investment in Ethiopia.

Read: Safaricom stock jumps 6.8pc on Kenya unit profit growth

“The period under review was a challenging one for the business, our consumers, and the country at large. The accelerated pressure on our consumers’ wallet, increased taxation, fuel price hikes, currency depreciation amongst others have had a substantial effect on our business during this period,” the group CEO Peter Ndegwa told an investor briefing in Nairobi last week.

“Our performance has been exceptional despite strong headwinds caused majorly by strong economic headwinds.”

The group’s unaudited financial statements shows total operating costs increased by 22 percent to Ksh37.74 billion ($249.93 million) from Ksh30.96 billion ($205.03 million) as net finance costs more than doubled to Ksh7.12 billion ($47.15 million) from Ksh2.93 billion ($19.4 million) in the same period.

On the other hand, Group total revenue grew by 7.29 percent to Ksh164.61 billion ($1.09 billion) from Ksh153.43 billion ($1.01 billion) helped by a strong growth in MPesa and Mobile data revenues that grew by 16.5 percent and 12.5 percent respectively.

The revenues were also boosted by Ksh13.02 billion ($86.22 million) hyperinflation monetary gain from the Ethiopian operations.

Read: Safaricom's half-year net profit up 2.1pc to $225m

Greater value

“From the results, most of our business lines performed well led by MPesa and Mobile Data. This has been fuelled by continued efforts to provide greater value to our customer,” said Mr Ndegwa.

Mobile data revenue grew by 12.5 percent to Ksh29.58 billion ($195.89 million), MPesa revenue grew 16.5 percent to Ksh66.23 billion ($438.6 million) while Messaging revenue grew six percent to Ksh5.74 billion ($38.01 million).

However, voice revenue declined by three percent to Ksh38.68 billion ($256.15 million).

The group’s operating costs as proportion of total revenues increased to 22.9 percent from 20.2 percent.

The Nairobi Securities Exchange (NSE)-listed telco launched its mobile network in Ethiopia, the continent’s second most populous country with an estimated 119 million people, in October 2022, breaking the long running monopoly of the state-owned Ethio Telecom.

It also acquired a licence to operate a mobile money service and on August 15 this year, the telco launched its money transfer platform services (MPesa) in Ethiopia by rolling out 2,057 sites in 22 cities and attaining over four million three-month active customers.

Read: Safaricom launches M-Pesa in Ethiopia amid civil unrest

Shared digital future

“Our vision for MPesa in Ethiopia is to build a robust digital payment platform for inclusive financial services. We are focused on promoting a cash-light economy and deepening financial inclusion that empowers customers and businesses. We remain committed in our purpose of transforming lives for a digital future in Ethiopia,” said Ndegwa.

Safaricom which controls over 50 percent of the total market capitalisation on the NSE is 35 percent owned by South Africa’s largest mobile phone operator Vodacom and the government of Kenya which owns a similar stake.

British Vodafone owns 5 percent of the shares while the remaining 25 percent are held by individual and institutional investors.

Read: Safaricom finalises acquisition of M-Pesa holdings from Vodafone

The telco offered 10 billion shares (25 percent stake) priced at Ksh5 ($0.03) per share at the NSE in 2008.

The stock’s market value has more than doubled in 15 years to Ksh12.45 ($0.08) per share by the closing of the trading session on Wednesday (November 8) last week. The Group’s total net debt stood at Ksh84.98 billion ($562.78 million) as at September 30.

Last year, Safaricom posted an 18 percent drop in net profit to Ksh30.2 billion ($200.13 million) from Ksh37 billion ($245.03 million).

The telco attributed the decline to heavy costs incurred during its entry in the Ethiopian market, a review of the mobile termination rates (MTR) and introduction of Excise tax on SIM Cards.

In August last year, the Communications Authority of Kenya lowered the MTR from Ksh0.99 ($0.006) to Ksh0.58 ($0.003).

MTR refers to charges telcos impose on each other when customers make calls across different networks to facilitate the connection.