9 November 2012

Kenya: Safaricom Rebounds to Record Sh11.5 Billion Profit

Safaricom CEO Bob Collymore, in a KBS bus during the launch of Wakenya Tuongee promotion where callers will benefit from cheaper rates the longer they call . Photo/File

SAFARICOM yesterday proved it had overcome the negative impact of a vicious price war in the telecommunication industry to post a massive 113 per cent jump in half year profits before tax to Sh11.5 billion.

Net profits jumped 94 per cent to hit Sh7.8 billion as revenues grew by 19 per cent to reach Sh59.1 billion. The company said it has beat competitors to their own game by lowering its off-net tariff to the same level as the on-net.

This has seen voice revenues rising by 19 per cent to Sh37.4 billion. Despite the stiff competition, the company saw its number of customers rising by 6.5 per cent to 19.2 million while the average revenue per user has also gone up by 11.8 per cent.

M-Pesa and data continue to be a key revenue generator for the firm with non-voice revenues growing by 28 per cent to Sh18.7 billion. M-Pesa revenues, which now represent 18 per cent of total revenues, grew by 32 per cent to Sh10.4 billion.

Mobile and fixed data revenue grew by 30 per cent to Sh4 billion. M-Pesa now has 15.2 million customers with an additional 6, 000 agents recruited in the half year to raise the agency to 45, 000.

"We are pleased to have recovered from a very damaging price war," chief executive Bob Collymore told an investor briefing. The result prompted Safaricom to upgrade its forecast for the full year results forecasting that revenues will grow by low double digits. The firm had generated Sh107 billion in revenues last year and net profits of Sh12.6 billion.

Collymore said the improved performance has also been helped by a prudent cost management, stable macroeconomic conditions which has seen inflation, the exchange rate and interest rates stabilising. Direct costs for the period only rose 2 per cent from Sh21.9 billion to Sh22.3 billion.

The firm's earnings before interest, taxes, depreciation, and amortisation (EBITDA) which is a key measure of how much profit a company makes with its present assets and its operations on the products it produces grew to Sh22.3 billion with a margin of 37.7 per cent.

The company said it will employ close to 70 per cent of its capital expenditure in the second half to improve quality of services. "We have a lot of work to do in Nairobi where dropped calls is still an issue," Collymore said.

Collymore also indicated that costs of transactions on M-Pesa might go up following a decision by the Treasury to charge a 10% exercise duty on mobile money transfer services.

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