CIO East Africa (Nairobi)

Kenya: Safaricom 2013 H1 Profits Up 93 Percent to Sh7 Billion

Safaricom has announced the results for the first half of the 2012/2013. The announcement was made at the Michael Joseph Centre on Thursday afternoon and marks a year since the firm announced its first huge drop (41 percent) in profit.

The announcements were made to reporters and financial analysts and was attended by key Safaricom staff including Chairman Nicholas Ng'ang'a, CEO Bob Collymore and CFO, John Tombleson.

This year's results saw a huge recovery of +113 percent to Kshs 11.5 billion before tax. Collymore described the results as " a good recovery from damaging price wars". The CEO also said that the firm had decided to focus on delivering a good customer experience rather than price wars, which was now paying off in good results.

The results are promising as the second half typically delivers better performance than the first half.

Key highlights are as below:

Net profit up 93.8 percent to Ksh. 7.77 billion from KSh. 4.01 billion

Net income up 93.8 percent to Ksh. 7.78 billion

Total revenue up 19 percent to Ksh.. 59.1 billion

Voice revenue up 19 percent to Ksh. 37.4 billion

Non voice revenue(SMS, Data and M-pesa) up 28 percent to Ksh. 18.7bn

Earnings before interest, taxes, depreciation and amortization (EBITDA) up 51 percent to Ksh. 22.3 billion.

Free cash flow up 791 percent to Ksh. 5 billion from 0.7 billion

Customer number ups 7 percent to 19.2 million

Ksh. 650 million in to be spend in corporate social responsibility

Contribution to total revenue growth by breakdown

5.9 percent from voice

0.62 percent from SMS

0.91 percent from data

2.55 percent from M-pesa

Decline of 0.52 percent from handsets

Non Voice growth:

32 percent growth for M-pesa

17 percent growth for SMS

22 percent growth for mobile data - slow growth attributed to new data users with lower ARPUs

60 percent growth for fixed data

Commenting on the voice sector, Collymore says growth has come from a Ksh. 1 drop in off net call pricing to match on net pricing at Ksh. 4.

M-pesa highlights:

32 percent of voice top up come from M-pesa

contributes 18 percent of total revenue

M-PESA agents grew by 40 percent (6,000 new agents) to 45,540

Ksh. 69 billion deposited into M-pesa via agents in September 2012

Ksh. 62 billion withdrawn by users via agents in September 2012

Ksh. 80 billion in transfers transacted between customers in September 2012 equivalent 31 percent of Kenya's Gross Domestic Product

Collymore says that Safaricom is in discussion with the government on implementation of a new 10 percent excise duty on M-pesa transaction fee. Collymore terms it a "consumer tax which is to be borne by consumers" despite treasury directing the tax was to be absorbed by operators and not to be passed to consumers.

Data highlights:

30 percent growth in mobile and fixed data

data users at 5.6 million accounting for 29 percent of total users

9 percent increase in fixed data(WIMAX and fiber) customers to 6,718

Low growth attributed to new customers with lower ARPUs and halving of data prices in the year

1.8 million 3G handsets and 536,000 smartphones

Average usage at 60 Mb per month per data customer

Average Revenue Per User (ARPUs)

12 percent overall increase to Ksh. 491 from Ksh. 439

Voice ARPU at Ksh. 320 from Ksh. 288

SMS ARPU at Ksh. 39 from Ksh. 35

M-pesa ARPU at Ksh. 115 from Ksh. 92

Data ARPU at Ksh. 92 from KSh. 110 (see explanation above)

Cost highlights:

2 percent increase in costs to Ksh. 59.12 billion

Ksh. 3.57 billion in interconnection costs

Ksh. 9.39 billion in dealer discounts

Ksh. 2.58 billion in handset costs

Ksh. 0.36 billion in bad debts

Ksh. 3.22 billion in license fees

Ksh. 3.28 billion in other direct costs ( SIM cards, top-up cards, VAS billing, Acquisition and Retention costs)

Ksh 36.72 billion "contribution margin"

Operating costs (Payroll, Publicity, Leased Lines, Network & IT operational costs, and Other (rent, rates, insurances, etc)) increased 12 percent to Ksh. 14.4 billion but remained at 24.6 percent of revenue. Safaricom will try to reduce the costs by trying to reduce transmission costs, inventory costs, network operating costs (including fuel), • IT operational costs, headcount control (employee numbers) and insurance.

Capital expenditure stood at Ksh. 8.55 billion going to modernisation of Safaricom's network and increasing base station efficiency.

Base Station highlights:

Built 125 2G and 106 3G cell sites in last 6 months

modernised 410 sites

1,856 out of 2,815 sites modernised

1545 3G sites and 190 Wimax sites

Next six months will see deployment of 143 2G and 66 3G sites

233 sites in Eldoret, Eastern, Central Rift and South Nyanza to be modernised in coming six months

Collymore says the firm is working to improve voice quality and reduce amount of dropped calls in Nairobi.

Safaricom is investing Ksh. 5 billion in the next 10 years to build its own fiber network, 500 kilometre of fiber per year.

More on the results at http://www.safaricom.co.ke/images/Downloads/Resources_Downloads/Half_Year_2012-2013_Results_Presentation.pdf .

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