Safaricom braces for competition on key cash earner

Safaricom CEO Bob Collymore says the firm has a strategy that has been approved by the board and will focus on growing partnerships and not competition.

NAIROBI, KENYA: Safaricom Ltd, East Africa’s biggest cellular-network operator, is bracing for competition in its key mobile-money business that helped boost first-half profit by 30 per cent, Chief Executive Officer Bob Collymore has said.

Bharti Airtel Ltd’s Kenyan unit has begun rolling out a product with Equity Bank Ltd, the country’s largest lender, which offers clients the ability to do financial transactions using their mobile phones. Safaricom’s service, known as M-Pesa, handles transactions worth Sh121.3 billion a month and the product contributes about a fifth to revenue that grew 15 per cent to Sh79.3 billion in the six months through September.

“We have a strategy that has been approved by the board and we will focus on growing our partnerships and not competition,” Collymore (pictured) said in an interview in Nairobi. One such collaboration will enable Safaricom’s M-Pesa users to receive money from MoneyGram International Inc. (MGI)’s network of 345,000 locations around the world, the company announced yesterday.

Safaricom, which is 40 per cent owned by Newbury, England-based Vodafone Plc, is the largest company by market value in Kenya, East Africa’s biggest economy. Shares in the Nairobi-based company have climbed 12 per cent this year, underperforming an 18 per cent increase in the FTSE NSE 25-Share Index.

Equity Bank has so far issued about 200,000 SIM cards to its clients as part of plans to introduce mobile-money transfer services under the Equitel brand name. The lender is rolling out the product with little marketing or advertising, because demand for the service is “too heavy,” CEO James Mwangi said last week.

At the end of June, Safaricom had 19.8 million mobile money-transfer customers in a market with 26.6 million users, according to data from the Communications Authority of Kenya, the industry regulator. Revenue from M-Pesa in the six months through September increased 25 per cent to Sh15.6 billion, the firm said.

Grow payments

Safaricom has identified 600 outlets that would begin accepting payment for goods and services via M-Pesa by March 2015, the company said in a statement. There are currently 32,000 active so-called Lipa Na M-Pesa outlets and more than 690 distributors of various goods who use the service, it said. “Following the strategic direction to grow payments via M-Pesa we have seen the number of recruited and active merchants continue to grow,” added the firm.

Safaricom’s net income in the six months through September climbed to Sh14.7 billion from Sh11.3 billion a year earlier, Collymore said. Total revenue increased 15 per cent as the number of customers using Internet on smartphones and other devices rose 4.9 per cent to 21.9 million.

“Our financial results continue to demonstrate our resolve to grow the business and returns to our shareholders while at the same time providing customers with quality products and services,” Collymore said.

Chief Financial Officer John Tombleson disclosed at a briefing in Nairobi that the company has invested Sh255 billion in capital expenditure since inception 14 years ago.

—Bloomberg