3 November 2018

Africa: Safaricom Rides On Its M-Pesa to U.S.$315 Million Profit

Mobile service operator Safaricom has reported a net profit of Ksh31.5 billion ($315 million) for the half year ending September 30, 2018, lifted by revenue from its mobile money segment, M-Pesa.

The company, part-owned by South Africa's Vodacom and Britain's Vodafone, posted a 20.2 per cent increase after tax from Ksh26.20 billion ($256 million) a year earlier.

M-Pesa registered an 18.2 per cent jump in earnings of Ksh35.52 billion ($355.2 million) up from Ksh30.05 billion ($300 million) a year earlier.

It was the main driver of growth for the period, with an average of 30 million customers making approximately 12 transactions each per month.

Total revenue, which includes sales of mobile handsets and other one-off items, came in at Ksh122.84 billion ($1.21 billion) compared with Ksh 114.43 billion ($1.13 billion) in the same period last year.

Growth in data services slowed in the period, declining 10.8 per cent to Ksh19.45 billion ($192 million).

Safaricom's service revenue, which includes earnings from its core business such as voice calls, was Ksh118.21 billion ($1.2 billion), compared with Ksh109.73 billion ($1.1 billion) last year.

Its 29.94 million customers did not increase their call frequency much, with voice revenues nearly plateauing, increasing marginally by 1.4 per cent year-on-year to Ksh48.03 billion ($473 million).

Messaging revenue was also equally flat, growing by 1.2 per cent to Ksh8.82 billion ($87 million), while fixed services income jumped 21 per cent to Ksh3.91 billion ($38 million).

Customers have the option of making calls and sending messages using the social application, WhatsApp, which uses the internet.

Lipa Na M-Pesa revenues have returned to growth this year following the investment made last year, recording an increase of 49.9 per cent year on year compared with 0.9 per cent last year.

Discontinued

The company which celebrated its 18th anniversary last week, was two months ago hit by the introduction of the Finance Act 2018, which increased excise duty applicable on voice, SMS and data from 10 per cent to 15 per cent, in addition to the prevailing 16 per cent VAT on mobile services. In addition, the Finance Act introduced excise duty on internet services.

"Following these changes, we were forced to increase our headline prices for voice, SMS mobile data, home and enterprise Internet packages, a move that pained both us, and our customers," said the telcos chairman, Nicholas Ng'ang'a.

"As consumers grapple with inflation, higher taxes levied on M-Pesa, voice, SMS, mobile and fixed data, and our business is finding itself forced to maintain an increasingly delicate balance," added Safaricom chief executive Bob Collymore during the release of the results in Nairobi.

Safaricom remains the biggest contributor to the exchequer, having paid close to Ksh48 billion ($473 million) in taxes as of September 2018.

Last year, South Africa's biggest mobile phone operator Vodacom bought a 35 per cent stake in Safaricom for $2.6 billion ($26 million).

Even though the 11-year old M-Pesa service has taken root in Kenya and spread to the region, it was discontinued in South Africa in 2016 due to poor uptake because the service does better in markets that are less developed in terms of formal banking.

Data from the Communications Authority of Kenya shows that Safaricom shed 1.6 per cent of its subscribers' market share in the quarter ended June as rival Airtel added more users to its network.

This marked the third straight quarterly drop for the country's biggest operator, which had 29.7 million subscribers during the period.

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