PROJECTION

Safaricom expected to shake off Covid-19 slowdown in H1 results

The telco will announce half-year results on Wednesday

In Summary
  • Last year, the firm reported a six per cent drop in net earnings in first six months of the year
  • Fuliza, M-Pesa and internet expected to lift profits
Safaricom Chief Executive Officer, Peter Ndegwa at a past event.
Safaricom Chief Executive Officer, Peter Ndegwa at a past event.
Image: FILE

Kenya’s largest telecom Safaricom is expected to bounce back strongly from the Covid-19 pandemic that saw its half and end-year profits drop for the first time in 12 years.

Last year, the firm reported a six per cent drop in net earnings as subscribers shifted communication budget to basic needs, hurting the firm’s voice and messaging revenue.

M-Pesa revenues also dropped on the back of free mobile money transfers of Sh1, 000 and below, a policy put in place by the Central Bank of Kenya (CBK) to encourage cashless transactions as a Covid-19 containment mechanism.

Subsequently, M-Pesa revenue dropped by 14.5 per cent to Sh35.89 billion despite the value of transactions rising by 32.9 per cent to Sh9.47 trillion.

Voice and messaging earnings between April and September also fell by Sh2.79 billion and Sh0.53 billion respectively.

Those policies have since been reversed and will not affect financial results for the six months since April.

The telco will announce half-year results tomorrow with its overdraft product, Fuliza, M-Pesa and internet products expected to shore up its earnings.

The latest data on Fuliza released in August shows at least Sh220.40 billion was disbursed between January and June, a 25 percent jump from Sh176 billion in a similar period last year.

The jump in overdrafts translates to Sh1.2 billion daily borrowing in the period under review, compared to Sh972.3million over a similar period of 2020.

The overdraft service introduced in 2019 and underwritten by NCBA, KCB Group allows customers to meet essential needs and repay instantly with any money coming to their M-Pesa wallets.

“Economy is slowly rebounding. People are back to communicating and transacting. As usual, M-Pesa is going to be the lead revenue earner for Safaricom but Fuliza is the product to watch,’’ Terry Oyombe, a freelance financial analyst told the Star.

He added that income from the internet segment will drop slightly as companies and the government cut on remote working.

The telco’s net profit for the financial year ended March 2021 dropped by 6.8 percent to Sh68.67 billion from Sh73.65 billion the previous year.