Buoyed by Ethiopia market entry, Safaricom shares remain strong
Safaricom investors gave the company a vote of confidence following reports that the company entry into Ethiopia market is on track as share price withstood the announcement of a 1.7 percent net profit dip to Kes67.4 billion.
The telco’s share price only dipped a marginal 1.8 percent to Kes31.85 a share from Kes32.4.
Safaricom has reported profit declines over the last two years but the company share price has remained stable and the most profitable counter on the Nairobi Securities Exchange (NSE).
This is partly due to their dividend policy where the firm has increased its payout to shareholders from Kes54.89 billion in 2021 to Kes55.69 billion which represents Kes1.39 per share in respect of the year ended 31 March 2022.
Shareholders are also confident the company’s Ethiopian entry is an avenue for virgin growth having matured in the Kenya market.
The consortium led by Safaricom, South Africa’s Vodacom, and Japan’s Sumitomo was awarded a mobile operating license by the Ethiopian government and is preparing to launch operations this year.
Since the consortium was granted a license, it has invested more than $300 million, including establishing the data center, making it the first to make such a huge investment in an Ethiopian project in a short period of time.
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The company expects to get a mobile money license in Ethiopia where Safaricom is expected to replicate its M-PESA success in a market with very low financial services penetration rates.
Safaricom is attracted by the growth potential in that market whose 110 million people mean the country offers a penetration rate of 46 percent.
By contrast, Kenya’s 69 million mobile money phone subscribers give it penetration of over 100 percent.
Ethiopia which is slowly resuming normalcy after two years of civil war is expected to ride the potential of mobile money services like M-PESA with the potential to transform Ethiopia’s economy.
The ability to access digital banking services is likely to be a game-changer for Ethiopians whose banking sector has no way of transferring funds from one bank to another.
This will allow Ethiopians to advance quickly without the heavy burden of investing in inefficient banking brick and mortar systems accelerating financial services penetration at a faster rate.
