Safaricom has recorded a 15.1 per cent decline in revenue from the sale of mobile phones as customers shied away from purchases of the gadgets owing to increased prices.
The Nairobi Securities Exchange (NSE) listed company’s handset revenue declined to Sh10.46 billion in the financial year to March 2023, down from Sh12.33 billion it earned in the previous year.
Some Sh9.79 billion of this revenue was derived from selling mobile handsets in Kenya while Sh672 million was earned from selling the devices in Ethiopia, according to the company’s latest annual report.
The telco sells mobile phone handsets, decoders, starter packs, and other accessories through dealers and own retail outlets across the country.
The company’s revenue from selling mobile phones had been rising steadily in recent years, growing by 10.5 percent from Sh6 billion in 2019 to Sh6.63 billion in 2020.
This revenue shot up by 28.3 percent to Sh8.51 billion in 2021 before shooting up by 44.8 percent in 2022 on increased sales of the devices driven by high demand.
Safaricom has attributed the decline in handset revenue to the sharp decline of the Kenyan shilling against major world currencies especially the US dollar which increased the cost of importing the gadgets.
The company was forced to pass on the higher cost to consumers by increasing the prices of mobile phones, but the higher prices spooked consumers who reduced purchases.
The Kenyan shilling depreciated 15.1 percent against the US dollar between the end of March 2022 and March 2023 from Sh114.95 to Sh132.33, piling pressure on importers.
“Depreciation of the Kenyan shilling has impacted the business on many fronts including the increased cost of doing business on energy and diesel,” said the company.
“This has, in turn, increased our network and operating expenses and imposed a higher cost in importing handsets, thereby increasing the price at which we have to sell, and ultimately dampening the uptake of smartphone devices in the market,” it said.
The sale of mobile phones and other fast-moving accessories is part of Safaricom’s plan to diversify its revenue streams away from voice, data, SMS, and M-Pesa which are its main revenue sources.
“We want to deal with the decline in revenues on other sides by accelerating growth in new areas,” said Safaricom Chief Executive Officer Peter Ndegwa recently.
Kenya’s smartphone market has been hit by reduced demand amid high prices as importers of the gadgets pass on the jump in import costs to customers.
Kenya's smartphone imports fell by 13.5 per cent in the three months to December last year compared to the same quarter in 2021, according to data released by International Data Corporation (IDC) in March.
It was the second consecutive quarterly drop in 2022, according to the company.
IDC attributed the decline to supply shortages and high inflation as a weaker shilling significantly increased smartphone import costs.
Smartphones now account for 72 per cent share of overall mobile phone shipments to the country, said IDC.
The firm noted that emerging companies that are running asset-financing schemes for the purchase of mobile phones did not record such a large drop in demand.