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Safaricom rides tough times to post Sh18b profit

NAIROBI, Kenya May 18 – Telecommunications operator Safaricom braved stiff competition and a stringent regulatory environment as it announced profit before tax of Sh18.4 billion in its 2010/2011 financial year.

The figure however marked a 12.4percent dip in profitability from the Sh20.8 billion posted in the corresponding period of 2009/2010.

Net profit stood at 13.1billion down from 15.1billion, signalling a decline of 13 percent.

As had been anticipated, profitability was eroded mostly by static growth in voice revenues, which stood at Sh63.5 billion.

Read statement of results

Safaricom CEO Bob Collymore however said a strategy to diversify away from voice helped keep the operator profitable.

"Our strategy of diversifying away from the voice has delivered very strong growth in the non-voice revenues driven by a significant growth in the number of data and M-PESA customers coupled with customers focused offerings," Mr Collymore told investors on Wednesday.

The Communications Communication of Kenya in August halved interconnect rates triggering a vicious price war between operators.
Mr Collymore said increased regulation in the sector had made the operating environment competitive, but was glad at the resilience shown by the company to grow.

"Revenue growth was faster than customer growth which indicates that it\’s not all about price," he said.

Total revenue grew 13 percent to Sh94.8 billion up from Sh83.96 posted the previous year. Voice revenue, which accounts for 67 percent of total sales, declined 1.7 percent while data revenue grew by 80 percent to Sh5.37 billion. Earnings from SMS climbed 45 percent to 7.54 billion shillings.

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Safaricom\’s money transfer service M-PESA continued to show growth with customer numbers growing by 14 percent to 14 million subscribers. Total revenues through M-PESA rose by 56 percent to Sh11.8 billion, contributing 13 percent of total revenues.

"The overall contribution of total data revenue increased to 28 percent from 19.6 percent which is in line with our strategy to diversify our products, services and related revenue, the Safaricom chief said.

Despite the ongoing Mobile Number Portability, the operator was able to grow its customer base by 8.8 percent to 17.2 million customers.

"This growth further cements our belief that mobile number portability will have no impact on our revenues in future," he said.

Earlier in the year, Safaricom unveiled its new structure know as Safaricom 2.0 intended to support its new strategy that is more customer focused.

The new structure led to the introduction of three key revenue streams Consumer Business department, Financial services Department and the Enterprise Business department to drive the operator\’s growth.

Mr Collymore said that with the new structure in place, Safaricom would segment its customers with the aim of delivering better services to the consumer.

"We want to become more intimate with the customer to better understand their needs and be able to satisfy what they are looking for," he said.

Safaricom directors have proposed a dividend payment of Sh0.20 per share with the firm expected to spend 60 percent of its income in paying dividends.

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