Safaricom: Kenya's most amazing money maker

Safaricom made Sh38.1 billion in net profits for the year ending March 2016 extending its lead as the region’s most profitable company.

This means the company made a whopping Sh104 million in profits every day in the last financial year. And in the words of the Chief Executive Bob Collymore, its profits divided to all Kenyans would earn everyone Sh850.

“The performance can be attributed to a number of factors including a growth in our customer numbers and non-voice revenue that includes M-Pesa and data,” Mr Collymore said during an investor briefing yesterday.
Its shareholders will be the biggest beneficiaries of the super profits.

Safaricom CEO Bob Collymore (centre), the firm's Chief Financial Officer John Tombleson (left) and Chairman Nicholas Nganga at the Safaricom Centre in Nairobi yesterday. Safaricom made Sh38.1 billion in net profits for the year ending March 2016 making it the region’s most profitable company.(PHOTO: ELVIS OGINA/ STANDARD)
As its 25 million customers strived to remain connected through short messages, telephone calls and the Internet, they earned the company Sh38.1 billion in net profits for the year ending March 2016.

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The firm, which has continued to invest heavily in infrastructure and has run ahead of competition to have a tight grip on the market, said it continues to focus on its customers in line with its strategic pillars.

"The performance can be attributed to a number of factors including a growth in our customer numbers and non-voice revenue that includes M-Pesa and data," Mr Collymore said during an investor briefing yesterday.

Most profitable

This makes Safaricom by far the most profitable company in the region, ahead of banks and multinational companies in East Africa. The listed telecom company defied a turbulent economic period that saw at least 18 companies on the securities exchange issue profit warnings to grow its profits by 19.5 per cent.

It made Sh31.8 billion in a similar period the previous year. Its shareholders will be the biggest beneficiaries of the super normal profits after the mobile operator said it would dish out 80 per cent of the billions it made. In total the dividend payout for the firm this year is Sh30.4 billion after another year of super normal profits.

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Following the performance, the firm said it had declared 76 cents per share held by thousands of its shareholders that include the government of Kenya and United Kingdom's Vodafone. This is an 18.9 per cent rise from what it paid out last year and the firm says it represents 80 per cent of its net income.

The company made a total of Sh195.6 billion in revenue in the year under review from all its earning streams combined - voice, M-Pesa, SMS, mobile data, fixed service and sales of handsets among others. Its revenues are about a third of Kenya's GDP and can be used to pay half the Standard Gauge Railway (SGR) or build five Thika Super Highways.

Service revenue for the company increased by 13.8 per cent to Sh177.8 billion while voice revenue (revenue made from calls) grew by 3.9 per cent to Sh90.8 billion. This made voice the revenue stream that posted the slowest growth.

But Collymore said the growth was still decent if compared to what was happening in the voice market globally. On its part, the revenues that come from sources other than making calls (non voice revenue), grew by 26.3 per cent making this sector reach almost half of the entire revenue from services earned by the mobile company.

Revenue from sending messages grew by 10.6 per cent to Sh17.3 billion. The firm attributed this growth to an increase in the number of short message services users due to its bundle offers and promotions. The firm earned Sh21.1 billion from mobile data, a growth of 42.7 per cent which it says was driven by a double-digit increase in 30-day active mobile data customers.

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The firm now has 14.1 million active mobile data customers. This translates to a 21.5 per cent growth. M-Pesa continued to deliver strong growth that helped keep its profit engine running after it generated Sh41.5 billion in the year under review.

This is a 27.2 per cent growth from the earnings in the year ended March 2015. The firm has a Sh30.4 billion in free cash flows, making it one of the most liquid companies on the Nairobi Stock Exchange.

direct costs

However, the firm's direct costs rose by 9.8 per cent from Sh56.7 billion to Sh62.3 billion. But it explained that operating expenses as a percentage of total revenue excluding construction was unchanged at 22.1 per cent despite the depreciation of the Kenyan shilling.

The company said it has now realigned its sales and operations teams to be independently managed in six regions. The firm says the focus by the teams on the ground, plus a Sh32.1 billion investment in the network, has led to improved data speeds and voice network quality.

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Safaricom has more than two thirds of the voice market. As at December 2015, Kenya had a mobile penetration of 87.7 per cent.

safaricomBob CollymoreJohn Tombleson