Safaricom half-year profit swells to Sh11.3 billion

Safaricom CEO Bob Collymore. (Photo:File/Standard)

By Macharia Kamau

Nairobi, Kenya: Telecommunications giant Safaricom reported a 38 per cent growth in profit before tax in the six months ending September.

The firm’s profitability hit a staggering Sh15.9 billion in the half-year to September, up from Sh11.5 billion over a corresponding period in 2012.

Profit after tax increased by 45 per cent to Sh11.3 billion. The company’s revenues grew to Sh69.2 billion, a 17 per cent rise from Sh59.1 billion in the first half of last financial year.

It attributed the growth to increase in the amount of money spent by customers, an overall growth in its customer base as well as a stable macroeconomic environment. The firm also said its non-voice revenues – including data, M-Pesa and text messages – are now key contributors to its revenue.

The monthly Average Revenue Per User or the amount that every Safaricom customer spent during the six months grew 11 per cent to Sh547 from Sh490 over the first half of last year.  “This set of results demonstrates our commitment to growing investment and shareholder returns through sustained commercial and financial performance across our entire service portfolio,” said CEO Bob Collymore.

Safaricom expects to continue with the good run for the remaining half of its 2013/2014 financial year but cautioned that the new value added tax (VAT) laws could affect the spending patterns of its customers.

“We are watchful of the new VAT Act… it might affect the consumer behavior in respect to our industry,” said Nicholas Nganga Safaricom chairman.

Voice remained the company’s significant revenue stream, bringing in Sh41.9 billion, a growth of 12 per cent. Revenue from text messages grew 48 per cent to Sh6.35 billion from Sh4.27 billion. M-Pesa revenues grew 19 per cent to Sh12 billion from Sh10.43 billion while mobile data grew 43 per cent.

Share price

Text messages, M-Pesa and data, referred to as non-voice, accounted for 30 per cent of the total revenue.

The company’s share has had a rally in the recent months. The share traded at record high this week, hitting Sh9.70 on Monday. It, however, slid marginally during yesterday’s trading session to Sh9.65.

This is a significant rise from Sh4.50 that the share was trading at in November 2012 and its all-time low of Sh2.50 in 2011. This means investors who bought the stock in 2011 have seen the value of their investment triple in just two years while the investment has more than doubled for those that acquired shares towards end of last year.

“The performance of the share at the Nairobi Securities Exchange (NSE) has been impressive, with the market capitalisation reaching Sh360 billion and it is a clear representation of shareholder confidence in NSE as well as Safaricom fundamentals,” said Nganga.

Unregistered SIM cards

The operator is also facing regulatory hurdles. The Ministry of Information and Communication early this year gazetted regulations requiring the operators to deny services to unregistered subscribers, which saw all the four operators lose a number of clients, and last month the Communications Commission of Kenya (CCK) set in motion a process to review the regulations to make liable not just the operators but also their agents and customers selling and using unregistered SIM cards.

The regulator also threatened not to renew Safaricom’s licence, which expires June 30 2014 unless it ups its quality of service.

CCK in July said it would only renew the telecom’s licence pegged on the conditions that the company pays Sh2 billion licence fee upfront as well as meeting the set minimum quality of service standards.

The quality of service has been a thorny issue in the industry, with tests done by the CCK showing that all the operators are largely below the set minimum standards. The operators have, however, argued that they are within the internationally set standards, according to internally done tests.

Nganga, however, said the firm had ironed out outstanding issues with the regulator.

“CCK has agreed to renew our licence for a period of ten years… we will pay them on time. On the quality of service, we are committed to having the highest quality level in the field,” he said.