Safaricom profit drops

November 12, 2008

, NAIROBI, November 12 – Mobile Service provider Safaricom has announced a 14.7 percent reduction in after tax profit for the six months ending September 30 compared to the same period last year.

The company’s profit after tax reduced to Sh6.217 billion compared to the previous year’s Sh7.28 billion, while pre-tax profits decreased to Sh8.976 billion against Sh10.536 billion over the same period last year.

Safaricom Chief Executive Michael Joseph, however, down played the reduced profits citing the operating environment within which the mobile company has been working in, in the last six months.

“A number of players have come to the market and one could even be launching this week. Other challenges included high interest rates, runaway inflation, which have all hugely affected our consumers’ purchasing power,” said Mr Joseph, who also added energy costs as a contributing factor.

 “As a major user of electricity the amount of power cuts we have in this country are completely unacceptable. That you have a drop of rain and the power goes off means that costs go up,” he complained.

This was the first time the mobile company publicly announced its financial results since listing on the Nairobi Stock Exchange in June this year. Mr Joseph observed that the future of the company is hugely dependant on increased investment in data if it is to survive the competition.

Planning and Vision 2030 Minister Wycliffe Oparanya who spoke during the results announcement was quick to reassure the company that the issue of energy costs was being addressed by the ministers in charge of the docket.

Mr Oparanya however challenged the mobile company to outwit the competition by being more innovative and investing in the latest technology.

“The road into the future will be quite challenging for you considering the increasing number of players in this industry,” Mr Oparanya cautioned.

On the other hand the company’s subscriber base rose by over 50 percent in the first half of the year as the company invested heavily in network coverage and acquiring new users.

 Meanwhile Mr Joseph sought to assure investors in the company that its dynamics were still strong despite the decline in share price at the bourse.

“Despite what you may be seeing and hearing around, the company has lost only 12,000 shareholders since it listed compared to the 880,000 who actually participated in the initial public offering,” he said.

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