Safaricom profit hits Sh23bn as M-Pesa powers its growth

Safaricom earned Sh23 billion in profits in the year ending March 2014, stamping its position as the most profitable company in East Africa.

The firm grew its net profit by 31.2 per cent, buoyed by strong growth in its customer base and increased revenues services such as SMS, M-Pesa, the innovative money transfer platform and data.

Addressing investors Monday, CEO Bob Collymore said the firm’s customers increased by 11.07 per cent to 21.6 million in the same period.

Revenues from these services went up 28 per cent to Sh52.1 billion against an 11.6 per cent growth reported in the voice segment.

Up to Sh101.3 billion per month was transacted through M-Pesa in the year. Revenue made from the platform rose 22 per cent to Sh26.6 billion.

Driven by growth in the number of Internet subscribers in the country, Safaricom’s data revenue grew 41 per cent to Sh9.31 billion while revenue from messaging services grew 34 per cent to Sh13.6 billion.

Total revenues increased by 16 per cent to Sh144.7 billion.

“Strong growth in non-voice... underpins our strategy to diversify our revenue streams,” said Mr Collymore.

Safaricom has recommended that shareholders earn 47 cents per share, a 51.6 per cent improvement from the pay-out last year.

The company reiterated a promise made last year to provide free Internet alongside the government’s free laptop programme once it rolls out its planned 4G network.

Even as Safaricom bets on the non-voice segment of its business to sustain profitability, the company will have to contend with a market whose dynamics are shifting fundamentally.

Safaricom and Airtel had earlier this year expressed interest in jointly acquiring the assets of rival yuMobile as it exits from the market.

The industry regulator, the Communications Commission of Kenya (CCK), has however, pegged the proposed deal on a raft of measures that are expected to see Safaricom share its infrastructure and its mobile money agent network with incumbent and new players in the telecommunication market.

Standard Investment Bank in a research note released on Friday said that depending on the implementation of the new measures, the “competitive strength of Safaricom may be loosened.”

Mr Collymore yesterday said that “there has been no progress” on the deal and that the company was still considering the conditions put on the table by CCK.

YuMobile’s imminent exit from the telecommunication scene comes even as new players arm themselves to fight for a piece of the market.

Last month, CCK issued three companies with Mobile Virtual Network Operator (MVNO) licences.

Kenya’s largest bank by customer base, Equity, is one of the entrants to the telecommunication sector through its subsidiary, Finserve Africa Ltd.

The other MVNOs are Zioncell and Mobile Pay Ltd, which owns the Tangaza Pesa brand.

With its strong banking foundation, Equity Bank’s expected products are seen as the most likely to erode Safaricom’s competitiveness especially in mobile money transfers.

The companies are positioning themselves to fight for a cashless payments market that is set to grow dramatically with the advent of cashless payments for government services and in public transport.

“There is a lot of excitement about new competition coming into the market but you have to view it in the context that the market is still 98 per cent cash. There is a lot of room for everyone,” said Mr Collymore.

Another source of uncertainty in the coming year is the implementation of the Mobile Termination Rate (MTR) glide path by the CCK on July 1.

This will see the rate that companies pay for calls terminated outside their networks fall to 99 cents from Sh1.15.

There has been speculation that the fall in MTR could lead to a similar drop in tariffs reminiscent of the rock-bottom pricing introduced in 2010.

Safaricom’s licence is also  up for renewal in June. 

CCK has tied it meeting minimum standards for quality of service, a benchmark against which Safaricom only attained a 50 per cent score according to CCK’s latest review.

Operators are expected to gain a score of at least 80 per cent on eight indicators.

Safaricom’s shares trading on the Nairobi Securities Exchange yesterday closed the day at Sh12.90, a 0.4 per cent change from the close of business on Friday.