Safaricom shrugs off pandemic to post Sh68.6b profit

A mobile phone care centre operated by Safaricom in the central business district of Kenya's capital Nairobi, May 11, 2016. [Reuters, Thomas Mukoya]

M-Pesa has now become the leading revenue stream for Safaricom, beating voice that has traditionally been the company’s mainstay. 

The mobile money service earned Safaricom Sh82.65 billion while voice service generated Sh82.55 billion in the year that ended March 31.

This performance came even as the telco reported a 6.8 per cent drop in profit after tax to Sh68.6 billion compared to Sh73.6 billion reported the previous year.

The profit was held down by Central Bank’s directive to mobile operators to offer mobile money transactions under Sh1,000 free of charge last year as well as the poor state of the economy due to Covid-19.

However, Peter Ndegwa, the Safaricom chief executive said the company’s earnings were better than anticipated as the company and the economy appeared to head into recovery in the second half of the financial year.

“We’ve faced quite a turbulent year but our business has delivered on the higher end of the guidance range,” he said while releasing the results yesterday. 

Earnings before tax

The company had projected to make pre-tax profit of between Sh91 billion and Sh94 billion for the year, a 10 per cent drop from the previous year. However, it reported even better results at Sh96.16 billion in earnings before interest and tax. 

“The recovery in the second half of the year was driven by the return to charging on M-Pesa transactions in the fourth quarter, double-digit growth in mobile data, fixed data growth alongside growth in consumers and usage,” said Ndegwa. 

Safaricom recorded Sh250 billion in total service revenue, a marginal decline of 0.3 per cent.

Overall, M-Pesa revenue fell by Sh1.8 billion in the last financial year from Sh84.44 billion made in the previous year, the largest drop in recent years.

The most affected revenue streams were in mobile money transfers and payments, which reported Sh4.2 billion and Sh1.7 billion drop in earnings for the year. 

The telco said about 1.7 billion M-Pesa transactions with a value of Sh4.4 trillion were zero-rated.

At the same time, revenue from voice fell by Sh4 billion from Sh86.53 billion while SMS revenue grew 11.7 per cent to Sh13.6 billion as at the end of the financial year. 

The firm now counts 31.4 million one-month active customers as at the end of last year and 28.3 million on M-Pesa.  

Safaricom further realised Sh4.2 billion in earnings from sports betting in the period under review, marking a 12 per cent increase compared to last year.

This was largely attributed to a decision by the High Court earlier this year that lifted a ban on outdoor advertising on betting and the resumption of sporting activities towards the end of the financial year.   

At the same time, increased demand for internet connectivity saw the company’s revenues from mobile data and usage in the home fibre segment hit new highs.

Mobile data revenue stood at Sh44.7 billion, an increase of Sh4.6 billion compared to the figure reported during a similar period last year.

The number of active customers on the company’s fibre to the home business rose to 137,400 as at the end of last year, up from 104,500 in the previous year. 

“Fixed service and wholesale transit revenue grew six per cent year-on-year to Sh9.5 billion supported by growth in fibre to the home revenue, which grew 49 per cent to Sh3.5 billion,” said Dilip Pal, the chief finance officer.

“This was driven by working and schooling from home trends across our customers and increased penetration of homes connected.”

Pal further said a reduction in capital expenditure by 3.2 per cent to Sh34.9 billion as well as a similar drop in operating expenditure to Sh46 billion managed to stem some of the adverse impact of the Covid-19 pandemic on the bottom line. 

The company has proposed to pay Sh36.8 billion in dividends for the year, which is 34 per cent less than the Sh56 billion it paid out the previous year.