M-Pesa, data services drive up Safaricom profit to Sh37bn

Money transfer service, M-Pesa and data services drove the profit of Kenya’s leading telco Safaricom up by 12 percent to hit Sh37.05 billion in the six months to September.

The mobile operator, one of the most profitable companies in Africa, however recorded a decline in voice and messaging (SMS) revenues.

The earnings were boosted by the removal of the free State-backed transactions introduced last year to cushion customers against tough economic times induces by Covid-19.
M-Pesa earnings rose 45.8 percent to hit Sh52.3 billion, representing 37.8 percent of the total Safaricom’s earnings in the review period.

M-Pesa revenue jumped after the telco resumed imposing charges on transactions below Sh1,000 in January. The firm also noted that improved business activity contributed to a 16.9 percent jump in service revenues to Sh138.4 billion.

“Service revenue grew 16.9 percent year on year in the period supported by strong execution, recovery in M-Pesa revenue following the return to charging on person to person and Lipa na M-Pesa transactions below Sh1,000 beginning January 2021, and improved consumer confidence and business activity in the economy,” said Safaricom chief financial officer Dilip Pal at an investor briefing yesterday.

Voice revenue increased 3.2 percent year on year to Sh41.46 billion while messaging revenue declined 18.3 percent to Sh5.87 billion. Data revenue grew 6.3 percent in the period to Sh23.62 billion. SMS have been facing stiff competition from web-based apps like WhatsApp.

“We are pleased with the solid performance delivered in the period and we remain committed in protecting shareholder wealth and putting our customers first, continuously innovating to offer relevant products, services and solutions to meet their needs,” said Safaricom chief executive Peter Ndegwa.

“The outlook of the economy has improved with Kenya staging partial recovery from a depressed performance last year.”

Safaricom said it had revised its full-year earnings guidance for the 2021/22 financial year due to its investment in war-torn Ethiopia. Safaricom had initially issued a guidance of Sh105- Sh108 billion.

The firm, which is part owned by South Africa’s Vodacom and Britain’s Vodafone, said it expects earnings before interest and taxes (EBIT) to be in the range of Sh97 billion to Sh100 billion.
Mr Ndegwa said the Ethiopia crisis might have a long-term impact on its operations but maintained it was positive about its long-term outlook.
Safaricom expected to break even in the fourth year of its Ethiopia entry, after launching commercial operations by mid-next year, added Mr Ndegwa.
“Our break-even target may be significantly impacted by the impact of the current conflict on the launch of operations which we target by mid-2022,” he said.
“We hope for a fast and peaceful resolution to the current situation. We are in contact with the relevant (Ethiopian) authorities. We are confident and looking forward to launching commercial operations as projected whilst cognisant of the current evolving situation in Ethiopia.”
Safaricom has evacuated some of its employees from Ethiopia.

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