Higher taxes, Ethiopia entry cut Safaricom's profit to Sh67b

Mobile service provider Safaricom has recorded Sh67.5b in after-tax profit for the financial year ended March 2022, with earnings from M-Pesa crossing the Sh100b mark for the first time.

The company's earnings bounced back to pre-pandemic levels, posting a record Sh298b in total revenues even as a 40 per cent increase in income tax to Sh34b reduced after-tax profit by a marginal 1.7 per cent. The telco's bottom line was also impacted by its investment in Ethiopia, which is yet to be launched. The board has proposed a dividend of Sh0.75 per share, translating into Sh30.05 billion.  

The final payout, when added to the interim dividend of Sh25.64b, adds up to Sh54.89b. Chief Executive Peter Ndegwa attributed the company's performance to the growing uptake of M-Pesa payments and data, with the company surpassing its projections on earnings and expenditure.

"Excluding Ethiopia, our earnings before interest and tax was Sh114b against a guidance of Sh107-110b," said Mr Ndegwa during an investor briefing in Nairobi.

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"Increased usage continues to fuel growth as one-month active M-Pesa average revenue per user (ARPU) rose 18.9 per cent year-on-year, while chargeable transactions per month per customer grew 16.6 per to 20.3 transactions," explained Safaricom Chief Finance Officer Dilip Pal.

The telco further recorded 5.3 million downloads on the M-Pesa Super App, with more than 462,000 merchants so far downloading the business app.

Safaricom said it is working to increase the number of mini-apps on the M-Pesa App ecosystem and preparing to launch a version of M-Pesa for users aged below 18 years.

"We are in the process and working with the regulator to see how we can come up with a product that is usable to individuals who are below 18 and currently do not have a product that meets their needs," said CEO Mr Ndegwa.

"It will have restrictions on what those individuals can do because they are minors and also parental controls, which is one of the most important features that was not available," he said.

Mr Ndegwa, however, said the firm is still in the product development stage and subject to regulatory approval before going live. Revenue from mobile data recorded an increase of 8.1 per cent to Sh48b, largely on the back of new subscriptions to its home and business fibre offerings.

"Data performance in the first six months of the financial year was weighed down by absorbed excise duty adjustments from August 2021, which slowed down industry momentum and price rationalisation," explained the telco.

"Average rate per megabyte declined further by 31.2 per cent year-on-year to 8.88 cents, while usage per chargeable data subscriber grew 60.5 per cent to 2.3 gigabytes."  

The company further recorded a 10 per cent increase in mobile data ARPU to Sh205.7, which was attributed to the introduction of promotional offers like the “Mwelekeo ni Internet” campaign launched late last year.

Active 4G devices on Safaricom's network now stand at 10 million—half of which are 4G-enabled with consumers of more than 1GB.