Profits chime at Safaricom

November 10, 2010
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, NAIROBI, Kenya, Nov 10 – Despite increased competition in the telecommunications market, Safaricom posted a 15.1 percent increase in profit for its half year ended September 30.

Safaricom’s profit after tax rose to Sh7.63 billion during the six months compared to the Sh6.6 billion posted during the corresponding period in the 2009/2010 financial year.

Briefing investors on Wednesday, Safaricom Chief Executive Officer Bob Collymore attributed the growth to increased sales and higher revenue from data services.

“This was the result of continued strong growth in all aspects of the business, augmented by a further expanded and enhanced network, a robust and superior distribution channel, innovative products and a clear focus on value added services and data offerings,” Mr Collymore said.

“As we anticipated, data is proving to be the next frontier, delivering significant benefits,” he emphasised.

The mobile industry has become ultra competitive following the Communications Commission of Kenya’s decision to slush interconnection charges. This has sparked off a vicious price war as operators moved to shore up customer numbers.

This continued to put pressure on Safaricom’s voice revenues, which only rose by three percent during the period. The average revenue per user in the voice business declined to Sh321.7from Sh370.8.

Total non- voice revenue increased by 60.5 percent to Sh14.62 billion.

The overall contribution of data revenue incrased to 23.8 percent of total revenue in line with the operator’s strategy to diversify its products and related revenue streams.

During the period, turnover rose by 15.9 percent to Sh47.1 billion.

There was a slight erosion of Safaricom’s market share during the period from a pervious 78 percent to 77.7 percent.

The popularity of M-Pesa continued to grow, with 13.5 million customers registered representing 81 percent of the Safaricom customer base. In May, the M-Kesho service was launched in partnership with Equity Bank with the aim of deepening financial access of M-Pesa customers. M-Kesho so far has over 613,000 customers registered in the first five months.

Going forward, Mr Collymore told investors that they would continue to enhance the network as SIM card penetration is expected to rise to 70 percent in the next three years.

He also assured investors that Safaricom would withstand the entry of Bharti Airtel to continue posting positive results.

“Safaricom is built on a firm foundation. We have proved that competition will come and go since wars only last for a little while,” Mr Collymore said.

The company has and will continue investing in upgrading its network and building infrastructure to support its data business.

Chief Financial Officer Chris Tiffiins said capital expenditure increased by 52 percent to Sh10 billion in the first half.

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