Safaricom half-year profit rises to Sh37bn on end of free M-Pesa

Safaricom CEO Peter Ndegwa

Safaricom CEO Peter Ndegwa during the telco's 20-year anniversary celebration at the Serena Hotel in Nairobi on October 27, 2020.

Photo credit: Diana Ngila | Nation Media Group

Safaricom has posted a Sh37.055 billion net profit for the half year to September 30 boosted by higher M-Pesa revenue following resumption of charges on low-value transactions.

The company announced a 12.1 per cent rise in its net profit from Sh33.069 billion recorded in a similar period last year after revenue from the mobile money transfer service grew 45.8 per cent year-on-year to Sh52.32 billion.

The Central Bank of Kenya (CBK) in December ended free mobile money transactions of below Sh1,000 put in place in March to increase digital transactions and reduce cash handling to stem spread of the Covid-19 virus.

This saw total value of M-Pesa transactions grow 51.5 per cent to Sh13.7 trillion while transaction volumes grew 42 per cent to 7.3 billion transactions in the six-month period.  

However, Safaricom felt the full effects of the higher excise duty on airtime through the Finance Act, 2021 from 15 per cent to 20 per cent that saw muted performance in revenue from voice and messaging.

The company absorbed the excise duty increase on mobile data which saw data bundle prices maintained which saw a higher increase in data revenue, while the tax was passed on to voice and messaging.

This saw revenue from messaging fall 18.3 per cent in the half year to Sh587 billion from Sh7.18 billion, voice revenue grew marginally by 3.2 per cent to Sh41.46 billion from Sh40.18 billion, while data revenue increased 6.3 per cent to Sh23.62 billion from Sh22.23 billion last year.

The half-year period was punctuated by Safaricom and its consortium partners being awarded a telecommunications license in the populous Ethiopia in May as it gears up for regional expansion.

The telco’s Ethiopian subsidiary, Safaricom Ethiopia Telecommunications, will be commercially launched mid next year.

Safaricom Board chairman Michael Joseph announced that the company will absorb the Sh44.4 billion ($400 million) debt for the Ethiopian license on its balance sheet to boost its working capital.

Safaricom’s debt has risen to Sh76.99 billion in the six-month period, up from Sh14.77 billion in the same period last year.

“To support the payment of license fees for the telecommunications license awarded to the Safaricom-led consortium by the Government of Ethiopia, we undertook a one-year bridge facility of $400 million (Sh44.4 billion) to finance this venture. We are currently seeking to term out the bridge facility through a long-term debt arrangement so as to manage our working capital requirements in the short term and minimize the currency risk for the dollar loan,” he said.

Safaricom Chief Executive said the company is assessing the situation in Ethiopia which has been engulfed in fighting between government and rebel forces, regarding its operations and safety of its staff in the country.

“We are currently in the process of setting up our operations (in Ethiopia) ahead of the commercial launch in 2022. We are confident and looking forward to launching commercial operations as projected while cognisant of the current evolving situation in Ethiopia,” Mr Ndegwa said.

“Our priority is safety and security of the small number of employees that had already joined the organisation,” he said.

The company is betting to tap on Ethiopia’s huge population of over 110 million people that has a mobile telephony penetration of only 43 per cent and mobile financial services at less than 2 per cent.