- Its half-year results dropped 6% to Sh33 billion.
- The telco lost Sh19 billion worth of M-Pesa revenue by December 31, 2020, on transaction fee waiver
Image: COURTESY
Kenya’s most profitable firm, Safaricom could post a drop in full-year earnings, the first in over two decades of its operations on Covid-19 effects.
The telco's financial year under review was marred by Covid-19 social-economic disruptions, hampering users' spending patterns. The reporting period started in March last year at the time Kenya reported its first Covid-19 case.
Safaricom's half-year profit dropped six per cent to Sh33 billion compared to the same period in 2020 attributed to zero-rating of M- Pesa transactions and a drop in voice revenue as users cut on communication budget due to Covid-19 economic pressures.
M-Pesa was the most impacted, posting a year-on-year (YoY)decline of 14.5 per cent. The service contributed Sh35.9 billion to the firm's earnings compared to Sh42 billion recorded over a similar period in the previous financial year.
Safaricom CEO Peter Ndegwa termed the performance as good given the tough operating environment.
Acting Chief Operating Officer Ilanna Darcy said the ongoing M-Pesa transaction relief to cushion consumers and the overall economic effect of Covid-19 on households slowed profits growth.
The telco was forced to waive charges on transactions less than Sh1,000 for nine months since March as part of the government's Covid-19 economic relief measures and also encourage cashless transactions as a health precaution.
This saw the telco lose Sh19 billion worth of revenue by December 31, 2020.
Despite the drop, Safaricom paid an interim dividend of Sh18 billion, equivalent to Sh0.45 per share for the first time, citing good financial performance and the need to support investors amid the Covid-19 pandemic.
This was the first time the telco's M-Pesa wing was reporting a drop in earnings since the service was unveiled in 2007. It was also the first time that it reported a drop in earnings.
In 2020, the listed telecommunication firm accounting for half of Nairobi Securities Exchange (NSE) turnover recorded a 19.5 per cent jump in profits to Sh74.7 billion on strong mobile money service M-Pesa and mobile data revenue growth that offset a decline in voice and messaging (SMS) revenues.
During the period, Safaricom's M-Pesa revenue grew by 12.6 percent to Sh84.44 billion ($844m) as mobile data revenue increased by 12.1 percent to Sh40.67 billion ($406m).
In 2018, the firm's net earnings grew to Sh55.3 billion, compared to Sh48.4 billion the previous year on the back of M-Pesa and data revenues. This represented a 14.3 per cent growth.
M-Pesa revenue for the period grew 14.2 per cent to Sh62.9 billion while mobile data was up 24 per cent to Sh36.4 billion in the period.
A drop in revenue is unlikely to dampen the spirit of investors hoping to reap from the firm's activities in Ethiopia, after its application was accepted for consideration.
Safaricom was one of the members of a consortium that includes Vodacom Group Ltd (South Africa), Vodafone Group Plc (UK), CDC Group Plc (UK) and Sumitomo Corporation (Japan), that submitted bids for a nationwide telecommunication service license in Ethiopia.
The news of bid submission saw the firm's share at NSE hit at an all-time high of Sh39.90 late last month as investors rushed to buy.
This pushed the telco’s market value to nearly Sh1.6 trillion – the highest level since the company started trading on the Nairobi bourse on June 9, 2008.