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Safaricom in the dark on KRA plan to tap into M-Pesa

BUSINESS
By Paul Wafula | May 13th 2016

The taxman is yet to contact Safaricom on plans to start using its mobile money platform to net tax cheats.

The Kenya Revenue Authority (KRA) said it was seeking the right to access individual and companies’ mobile money transactions in a new war against tax cheats. The move has been received by various reactions.

“I haven’t spoken with KRA on the issue. M-Pesa gives regulators visibility and we should encourage more users to be on the platform,” Safaricom Chief Executive Bob Collymore said in an interview.

Mr Collymore, who hinted that going after taxpayers using the platform may be counter-productive, however said a decision will be taken at an appropriate time after the necessary consultations are done.

It is not yet clear if KRA has the necessary backing of the law to go after tax evaders using M-Pesa, but the move will see the taxman have access to huge volumes of data that will see it build profiles of users. KRA has also hinted at going after bank records in its efforts to tighten the noose around tax evaders.

Safaricom also revealed that it will spend up to Sh33 billion in the new financial year as it races to stay ahead of its competitors. The firm expects to continue its profit growth momentum in the next financial year. “We expect our EBITDA (earnings before interest, taxes, depreciation and amortization) for 2017 to be in the range of Sh89 billion to Sh92 billion, and capital expenditure to be in the range of Sh32 billion to Sh33 billion,” the firm said at an investors’ briefing.

EBITDA is used to show a firm’s ability to earn a profit and generate cash after netting out what is not core to its internal operations. In the year ending March 2016, the EBITDA was up to 44.56 per cent compared with 43.58 per cent in the 2015. With this projection, if all factors remain constant, the firm will earn more than the profits it made in the last financial year.

In its latest results, the firm to grew its profits by 19.5 per cent to Sh38.1 billion. This will see United Kingdom’s Vodafone, its biggest shareholder take home Sh12.1 billion in dividends. Vodafone has 16 million shares. The Government of Kenya, the second biggest shareholder with 14 million shares will earn Sh10 billion in dividends. The remaining Sh8 billion will be shared among the thousands of its other shareholders.

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The firm set aside 80 per cent of its profits, which translates to Sh30.4 billion, to be shared among its shareholders. Shareholders will earn 76 cents for every share they own. Safaricom is also hoping to focus on improving its relationship with its customers by overhauling its call centres.

Voice Network Quality

The firm has kept its capital investment expenditure at above Sh30 billion in the last three years, investments it says are paying off. “I went out to the field some time back and I realised that we had started to lose touch with some of our customers. That is why we have realigned our sales and operations teams to be independently managed in six regions,” Collymore said in an interview with The Standard.

The regions include Coast, Nairobi East and Nairobi West, Mt Kenya among others. The sales teams and network teams in each region will be reporting to the head of the region. “The focus by the teams on the ground, plus the Sh32.1 billion investment in the network, has led to improved data speeds and voice network quality,” the firm said.

In 2014, the firm invested Sh27.8 billion and last year, it allocated Sh33.7 billion to build its fibre infrastructure. The firm says over 2,010km were completed in key metro areas. It also invested in the modernisation and upgrade of 2G networks, its 3G and 4G networks and a new M-PESA platform and information system upgrades.

“Total sites have increased to 3,382, of which 1,943 are 3G-enabled, giving Safaricom the most extensive coverage in the country,” the firm said in its 2015 annual report. The firm is also counting on a Memorandum of Understanding it signed with Kenya Power to bring down the cost of internet and boost its entry into the fibre to home business.

“The MoU with Kenya Power will allow us put fibre on the poles rather than the ground. This should be better for both partners and cheaper,” Collymore said. The firm’s revenue losses from WhatsApp and other social networking sites have been more than compensated by data revenue.

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