Safaricom profit drops to Sh13b

May 10, 2012
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The second half was the company’s stronger leg of the financial year during which net income doubled to Sh8.6 billion compared to Sh4 billion in the first half/FILE

, NAIROBI, Kenya, May 10 – Safaricom ended its 2012 financial year with a four percent drop in net profit to Sh12.63 billion compared to Sh13.16 billion posted in last year’s earnings.

“Net income dropped slightly around half a billion shillings due largely to the negative impact of forex losses as well as interest costs of Sh1.6 billion,” Safaricom CEO Bob Collymore explained on Thursday.

The second half was the company’s stronger leg of the financial year during which net income doubled to Sh8.6 billion compared to Sh4 billion in the first half.

The telecoms operator will not adjust call tariffs anytime soon especially as it made a 12.83 percent recovery in total revenue to Sh107 billion for its financial performance ended 31 March 2012.

Though the growth was driven primarily by significant growth in M-PESA and data revenue, better than expected growth in voice revenues of 8.6 percent also contributed to the increase.

In September last year, Safaricom increased the cost of calls originating and terminating within its own network by 30 percent and those ending in rival networks by 25 percent.

The price increments did prove to boost sales and profits marginally for the telcom which reported Sh13.1 billion in net profits in March 2011, a 13.2 percent drop from Sh15.1 billion in 2010.

“Our decision to adjust the tariff was not just informed by the silling rate; interest rates are still sitting at 18 percent and that is one of the factors that informed that decision. We do not see-saw on tariffs – we make a solid decision and we hold that decision,” Collymore said.

The company has seen its revenue negatively impacted by price wars and looming threat by the Communication Commission of Kenya to lower the Mobile Termination Rate (MTR) further from the current Sh2.21 per minute to Sh1.44 per minute.

Safaricom’s total customer base grew by 11 percent to 19.1 million from 17.1 million in March 2011, which Collymore credits for boosting resilience in voice revenue that continues to be the company’s biggest revenue stream raking in 64 percent.

M-PESA revenue grew 43 percent to Sh16.9 billion, with 15 million registered users, which the company continues to engage, boosting the number of nationwide outlets to 40,000.

Operating costs increased by 19.01 percent as a result of staff related costs made up of annual adjustments in pay and the introduction of employee share grants to boost retention.

Network operating expenses also increased from costs in network expansion reflected in the Sh26 billion injection last year to boost network quality, additional diesel and electricity costs and costs of fibre to offer backup.

Looking ahead the telecom market leader that holds 66 percent customer market share in Kenya, expects a low to middle single digit growth in revenue, maintaining its EBITDA (earnings before interest, taxes, depreciation, and amortisation) margin now 35 percent and continuing to democratize data.

Over the next two to three weeks the company plans to roll out voice and data promotions currently in consumer tests.

The Board announced a dividend pay out of 22 cents per share, a 10 percent increase from last year.

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