Fees waiver leads to first drop in net income for Safaricom in a decade
A nine-month waiver on mobile-money service fees during pandemic dented revenue
Kenya’s biggest telecoms operator, Safaricom, partly owned by Vodacom, posted its first decline in full-year net income in a decade after a nine-month waiver on mobile-money service fees dented revenue.
Net income dipped 6.8% to 68.7-billion shillings ($642m) in the 12 months through March, according to a presentation on Thursday. This compares with a median estimate of 69.28-billion shillings, according to data compiled by Bloomberg.
CEO Peter Ndegwa said the company expects a return to growth late in 2021 after the coronavirus crisis.
Service revenue fell as did sales at M-Pesa, the company’s crucial fintech product, after Kenya’s central bank asked Safaricom to forgo charges for about 80% of its mobile-money transactions.
“For M-Pesa the main risk is regulatory, with the recent Central Bank of Kenya national strategy looking at ways to fast-track interoperability between various payment systems,” Mohammed Khallouf, an analyst Citigroup Global Markets, said in a May 4 note to clients.
Safaricom is part of a consortium that bid for one of two new telecommunications licences in Ethiopia, which has a population of more than 110-million people and only one telecommunications carrier. Other members of the grouping include Vodafone Group and its SA unit Vodacom Group. The Ethiopian government is expected to announce bid winners soon.
Ethiopia said this week it would allow the two entrants to launch mobile-money services after a year, a major concession on its part as it had initially reserved the potentially lucrative product for state-owned Ethio Telecom. The monopoly, which the government also intends to partially privatise, has competitive voice pricing compared with Sub-Saharan African peers, according to Nairobi-based brokerage Kestrel Capital.
“We expect 4G and smartphone penetration to be the key driver for Safaricom initially as a new entrant, noting the minimal 4G coverage in the country,” Kestrel said in a note to clients before the earnings were published.
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