Safaricom’s half-year profit is down 10% to Sh33.5 billion as Ethiopia expansion slows growth

November 11, 2022 Newsroom

Telco giant Safaricom’s profit for the six months to September 2022 eased by 10 percent to close at Kes33.5 billion attributable to slow growth by the company’s new Ethiopia unit.

Safaricom Ethiopia’s service revenue for the period was Kes9.1 million while total revenue, including handsets sales, was Kes98.3 million.

“The Safaricom Ethiopia’s Kes98.3 million one-month revenues against six months’ expenses have resulted in a loss of Kes7.2 billion in the period,” Safaricom PLC Chief Financial Officer Dilip Pal explained.

Mr Pal added that the Group’s capital expenditure in half closed at Kes37.5 bilion with Safaricom Ethiopia operations expenditure accounting for 52 percent at Kes19.5 billion, which was largely channeled to roll out of sites and other operational readiness infrastructure required for the launch of services.

At the end of October, Safaricom Ethiopia had 561 sites in target cities across the neighbouring country that were active on 2G, 3G and 4G, and an additional 931 sites under construction.

Safaricom Kenya, however recorded solid performance with a 4.6 percent jump in service revenue growth to Kes144.8 billion in the period under review despite the prevailing macroeconomic challenges leading to a tough operating environment and elevated pressure on consumer spending.

“We are pleased with the commercial progress made in Ethiopia since launch of operations early last month. Most importantly we are enthusiatic on the growth opportunity in Ethiopia, with over 740,000 customers so far and 20,000 new customers joining the network daily. We are also encouraged by data and voice usage levels with 711MBs average usage per active data customers and 30 minutes of use per active voice customers for the month of October” said Peter Ndegwa, Safaricom PLC CEO.

Mr Ndegwa noted that Safaricom had invested over US$598 million in Ethiopia operations and was encouraged by the early uptake of services, great customer feedback on the quality of their data experience, and the revenue contribution by the Ethiopia unit.

The Government of Ethiopia has also committed to award Safaricom with a mobile money license which will boost commercial efforts, with a greater focus on driving financial inclusion and digital acceleration for the people of Ethiopia.

“We have reviewed our value propositions considerably driving more value for the same price points, through effective use of Data and Analytics to advance personalised offerings to customers. For instance, through our customer value management (CVM) tool, our data prices have gone down by 31.7 percent while usage has gone up by 69.8 percent,” said Mr Ndegwa.

Voice service revenue dropped by 3.8 percent to Kes39.88 billion; mobile data revenue grew by 11.3 percent to Kes26.30 billion, while M-PESA revenue grew by 8.7 percent to Kes56.86 billion.

The Numbers: Safaricom PLC Half-Year Results : –

1	Group net income, excluding minority interest, -10.0% to Kes 33.47 Billion
2	Total customer base +2.9% to 43.17 Million for Kenya, 180,000 for Safaricom Ethiopia
3	Service Revenue +4.6% to Kes144.83 Billion
4	Voice revenue -3.8% to Kes39.88 Billion
5	M-PESA revenue +8.7% to Kes56.86 Billion
6	Mobile data revenue +11.3% to Kes26.30 Billion
7	One-month active M-PESA customers +8.6% to 31.17 Million
8	One-month active mobile data customers +4.8% to 25.20 Million

“Given the impact of the mobile termination rates from Kes0.99 to Kes0.58, a slowdown in business operations due to the elections period, increase in excise duty on sim cards and mobile phones, and a failed rain season leading to more economic hardship for the country, Safaricom has done very well to deliver solid revenue growth and a net income that is within the expected range,” said Mr Ndegwa.

While economic, regulatory and tax headwinds will continue impacting revenue performance, Safaricom anticipates increased usage and customer growth to drive half two momentum.

“The board is pleased with the results delivered for first half of the financial year and remains committed in protecting shareholder wealth, by ensuring management puts our customers first, continuously innovating to offer relevant products, services and solutions to meet their needs. We remain mindful of the sustained consumer wallet pressure with rising inflation, the highest in five years at 9.2 percent in September 2022 and high commodity prices,” notes John Ngumi, Chairman, Safaricom Board of Directors.

Safaricom will soon be launching new products and services in the second half of the financial year, including the M-PESA Go product to enhance child safety and sound financial knowledge to children below 18 years as well as the anticipated return to charging on banking transactions.

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