Safaricom records modest profit, eyes data market

By Morris Aaron

Average revenue per user (ARPU) for voice calls in the mobile phone industry appears to have hit its peak, with Safaricom announcing a modest six-month profit yesterday.

The marginal 1.7 per cent increase in its half-year profit comes as the company beefs up its data services in anticipation of future declines in new connections and voice call revenues.

The market for voice traffic, in particular, has become competitive, with the entry of Telkom and yu being the significant variables.

Safaricom is also looking at increased product innovation and competitive pricing as pillars for continued market domination in the telecommunication sector.

"We intend to increase our market share in data services provision to compensate for voice call market share fall," said Michael Joseph, Safaricom’s chief executive.

The strategy was announced during the unveiling of half-year results, yesterday.

Safaricom attributed the marginal growth in profit to the "harsh economic environment that eroded disposable income of our customers."

During the six months to September 2009, pre-tax profit rose to Sh9.134 billion, from Sh8.976 billion the previous year. The company recorded a 17.8 per cent increase in revenue to Sh40.7 billion, compared to Sh34.5 billion last year.

Market share

Despite the drought, inflation and high cost of doing business, Safaricom snapped up 2.6 million new subscribers, a 21 per cent increase, bringing its total to just over 14 million.

However, Safaricom’s market share, by number of subscribers, slid to 77 per cent from 81 per cent in a similar period last year. Turnover grew by 17.8 per cent to Sh40.7 billion.

EBITDA (earnings before interest, taxes, depreciation and amortisation) — an approximate measure of a company’s operating cash flow based on data from the company’s income statement — look positive, up 10 per cent to Sh16.52 billion, from Sh15 billion.

"We are confident that we have seen the trough, and going forward the company will deliver excellent results," said Mr Chris Tiffin, the chief financial officer. Safaricom said it would up its data services offerings through its strategic partnerships and acquisitions.

it carried out this year.

to maximise on the fiber optic cable bandwidth.

Safaricom partnered with Jamii Telecom, a metropolitan fiber optic cable networking company, and has 51 per cent in OneCom and owns Packet Stream Data Networks.

Packet Stream Data Networks provides various data communications services, including fixed WiMAX access services. Its network is currently in Nairobi, Nakuru, Eldoret and Mombasa. OneCom on the other provides fixed Wimax services.

 

 

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