Why Mobile Data is a Cash Cow for Safaricom Ethiopia
Former Safaricom CEO and board chairman Michael Joseph caused a stir about 15 years ago when he pointed out that Kenyans have peculiar calling habits in relation to the company’s massive profit results. At the time, voice accounted for seven out of every 10 shillings subscribers spent on the network and the firm’s revenue was growing at an average of Kes12 billion annually.
While Michael Joseph’s statement might be framed as corporate banter sensationalized by the media, the contribution of voice to Safaricom’s success between 2007 and 2015 cannot be ignored. During this period, telcos pushed the envelope in promotional tariffs, price wars and loyalty programmes to grow market share and the result was a win-win for both; lower calling costs for users and higher volumes and revenues for service providers.
As Safaricom Ethiopia enters its second year of operations, mobile data is emerging as a key revenue source for the new subsidiary and one that will chart the revenue trajectory for the firm like the voice business did for Safaricom in Kenya 15 years ago.
According to the latest financial results, Safaricom Ethiopia more than doubled key mobile data indicators including one-month active users, MBs per chargeable user, and one month active revenue per user.
Of particular interest is the growth in the last two indicators. MBs per chargeable mobile data user grew by 186 percent from 1.5GB to 4.3GB, while one-month average revenue per user, ARPU increased by182 percent to Kes215 from Kes76. In comparison, MBs per chargeable mobile data user on Safaricom Kenya stood at 3.7GB in 2023, up 6.4 per cent from 3.5GB the previous year, while ARPU rose a negligible 1.5 per cent to Kes242.
While Kenya’s mobile data market is relatively more mature than Ethiopia’s, the potential inherent in the country’s 115 million-strong population and a strategic network rollout looks set to propel the latter’s revenue from this business segment to new highs.
Read also: Safaricom hits billion-dollar milestone
Safaricom Ethiopia network infrastructure
At the same time, Safaricom Ethiopia’s mobile data business has several other advantages that will help solidify its status as the future cash cow for the firm. One is the reducing cost and increasing versatility of network infrastructure. According to the firm’s latest financial results, Safaricom Ethiopia more than doubled its base stations from 1,272 in 2022 to 2,806 last year.
Safaricom Ethiopia’s network now covers 40 percent of the population. In comparison, Safaricom rolled out 600 base stations across Kenya in 2010 during the deployment of its 3G network. Another enabler for Safaricom Ethiopia’s success in mobile data is the growth of over-the-top streaming technologies and applications.
As more subscribers gain access to smartphones, mobile data will quickly become a necessity for the firm’s growing user base that is largely composed of Ethiopians under 25 years.
The significance of revenue from digital content platforms is apparent in Safaricom’s financial reports. In 2023 the company reported Kes700 million in revenues from video streaming services on its Baze platform as users on the platform grew 50 per cent to cross the 2 million mark. Safaricom Ethiopia will thus have the advantage of deploying new and existing Apps, including the M-PESA Apps rapidly and at scale.
As the company pushes on with its network rollout and subscriber recruitment, mobile data is emerging as a key selling point to woo Ethiopian users who might have peculiar scrolling patterns.
