Capital FM (Nairobi)

Kenya: Safaricom Net Profit Jumps 94 Percent to Sh7.8 Billion

Safaricom managed to recover losses made in the last financial year to post a significant 94 percent jump in net profit to Sh7.8 billion for the first half of its 2103 financial year.

Total revenues climbed 19 percent to Sh59.1 billion driven primarily by a seven percent customer growth and 12 percent increase in average revenue per user (ARPU) growth.

Accounting for 63 percent of Safaricom's total revenue, voice grew by 19 percent to Sh59.1 billion, driven by a 33 percent increase in rates and 19 percent decrease in minutes.

However the company's dependence on voice is reducing as it diversifies into other non-voice revenue streams, which now represent 32 percent of total revenues.

M-PESA increased by 32 percent to Sh10.4 billion for the first half, however the recently introduced 10 percent excise tax on financial services, including mobile money transfers will have an impact on revenue coming from that stream.

"If it's 10 percent excise duty it will be about Sh2 billion. This is a consumption tax designed for the consumer to pay. We are in discussion with the Ministry and KRA (Kenya Revenue Authority) around the modalities," Safaricom Chief Executive Officer Bob Collymore explained.

However it is yet to be seen what the impact of the excise tax on the competitive landscape will be considering that Airtel recently waived charges on its mobile money transfer service to all networks.

On the data front, mobile and fixed data revenue grew by 30 percent to Sh4 billion.

The company says broadband will be a key area for growth moving forward having invested in the underlying 3G, fibre and Wimax. "Only 10 percent of our base is on 3G, so our 3G is underutilised. We have begun our five-year Sh10 billion journey to build our own fibre network," Collymore said.

Data customers grew by 30 percent to 5.59 million, following the company's decision to terminate the unlimited mobile data bundles, allowing for more entry level users to widen the base.

Safaricom found unlimited unsustainable citing misuse of the bandwidth by a few users, which negatively impacted service delivery.

As far as 4G, Collymore said it will take a while as the company still wants to maximize on 3G and waits on deliberations going on at the government level.

The looming issue of the Mobile Termination Rate (MTR) the CEO added, is now in the hands of the industry regulator the Communications Commission of Kenya (CCK), though Safaricom has adamantly lobbied against a lower rate.

Damaging price wars that ensued in the last financial year saw the mobile operator register a four percent drop in net profit to Sh12.63 billion.

Calling prices have fallen by 58 percent for off-net calls and 62.5 percent for on-net, since the CCK introduced the current MTR regime.

However the CCK has indicated that the new MTR will attempt to hedge against erosion of the industry's profitability that has been a key concern of Safaricom since their performance will determine the levels of investment into the company.

Safaricom is forecasting a low double digit growth in total revenue for the 2013 full year results.

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