Kenya’s leading telco Safaricom has posted a six per cent decline in profit after tax for the half year ending September 30th, a development attributed to the impact of Covid-19.
The company saw its profits decline to $300 million compared to $318.2 million in the same period last year. This has been attributed to a drop in voice revenue and significant impacts on its mobile money service M-Pesa, following the zero-rating of transactions below $9 (KSh1,000).
This is the first time Safaricom has reported a decline in profitability in mid-year review since 2012, with cumulative revenues declining by 4.1 per cent from $1.18 billion to $1.13 billion.
“We have no concerns about the health of the M-Pesa business. This is because we know the decline is from the support of free cash transfers to Kenyans,” said Peter Ndegwa, Safaricom’s chief executive.
The zero rating of M-Pesa transactions had a significant impact on the service revenue which declined by 14.5 per cent to $326.3 million from $381.6 million.
Voice revenue also declined by 6.5 per cent from $390.8 million to $365.4 million as users cut on communication budget. Revenue from small messaging service (SMS) also went down from $70.1 million to $65.3 million.
However, during the period, the company reported an increase in data revenue by 14 per cent to $202 million from $177 million.
“The free cash transfers have weighed hard on our half year results. M-Pesa revenues now account for 30 per cent of total revenues in comparison to 33 per cent last year,” said Safaricom Acting Chief Finance Officer Illana Darcy.
While the waiver on fees affected the company, total value of M-Pesa transactions grew 32.9 per cent to a whopping $81.8 billion while total volumes grew to 5.1 billion as customers took advantage of the free fees.
During the period, Safaricom maintained its position as a major taxpayer paying $541.9 million in duties, taxes and licence fees.
The company remains cautiously optimistic of a rebound in the second half of the year, even as the Kenyan government institutes measures to curb rising Covid-19 infections.