Wednesday, November 9, 2011

Safaricom's profit declines as M-pesa revenue increases

By  Dan Muhuni
As predicted earlier by financial analysts, its now official that the full impact of mobile phone price war, escalating energy cost and rising inflation in the country are the major challenges that contributed to dismal Safaricom profits.
Investors were very keen to see how East Africa's most profitable company is holding up in the face of serious competition on voice revenues particularly with a further reduction in mobile termination rate expected in July this year.
Bob Collymore stressing a point during the financial announcement.
 According to Safaricom CEO Bob Collymore, during the announcement of the financial results,Safaricom net profit declined to Ksh 4 Billion from 7.6 billion in the last results. “Within the first half of this financial year we grew our active customer base by 8.0% to 18.1 million and revenue by 5.3% to Kshs. 49.6 billion despite a heightened competitive environment especially in the voice sector with headline tariffs falling by over 80%. “ However our voice business has shown considerable resilience with a traffic increase of 83% and a marginal decline in voice revenue of 5.5%.
The CEO noted that the Mobile Number Portability has had a negligible impact on Safaricom with net port-outs of only 18,000 recorded from April 2011.
“Our strategy to diversify into non-voice services has continued to deliver strong growth with these revenue streams gaining traction and now contributing 32% of service revenues. “ added Collymore
“Our M-PESA and Data offerings are undeniably market leaders in their respective sectors with a collective 43% growth in revenues. This is a clear demonstration that we remain Kenya’s preferred network and that our products and services are indeed making a constructive difference in the lives of our customers. “
Collymore noted that as Safaricom continue to invest in the network to ensure that we offer cutting-edge technology and reliable connectivity. In the first half of the year, we invested Kshs. 15.5 billion on our 3G network, our switching capacity, fibre connectivity and upgrading of our existing 2G equipment for increased quality and capacity. 52% of our network coverage is now 3G active. We recognise the increasing need for superior but affordable data connectivity and the fast paced changes in data needs among our customers.
We have reduced our mobile data pricing and introduced a variety of internet bundles to meet the varying needs of our customers. Our data customers now account for just over 10% of the Kenyan population, with 92% of all internet subscriptions in Kenya on Safaricom connected devices. By further expanding our distribution network and by making available affordable data enabled devices we are ensuring that every Kenyan has the opportunity to access the internet using the best and fastest connection in the region. We now offer mobile data speeds of 21 Mbps and trials for 42 Mbps are in progress. We continue with the modernization of our core network to ‘IP’ based technology. We have also upgraded our billing system to one of the most advanced billing systems in Africa and highlighting our commitment to customer service.
The firm's mobile money transfer platform M-Pesa, according to the analysts, has played a major role in enhancing "stickiness" and supporting overall profitability given the low calling tariffs during the period.


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