M-Pesa drives Safaricom as profit declines to Sh12.8bn

Mobile money transfer service M-Pesa helped Safaricom to shrug off a surge in financing costs and cut-throat competition to post Sh12.6 billion in profit after tax for the year ended March 31.

As a result, the company retained its position as East Africa’s most profitable company.

M-Pesa, the money transfer service, started five years ago as a value addition and subscriber retention tool but in the last financial year it brought in Sh16.9 billion — or 15.8 per cent of the firm’s revenue of Sh107 billion — making it the second most important income stream for the company after voice which contributed Sh69 billion or 64.4 per cent to the top line.

“Total revenues increased by 12.8 per cent from Sh94.83 billion to Sh107 billion driven by significant growth in M-Pesa and data revenue and better-than-expected growth in voice revenues,” said Safaricom chief executive officer Bob Collymore when he released the results on Thursday.

The growth in voice revenues by nine per cent to Sh68.9 billion was, however, driven by an upward revision in voice tariffs and an 11 per cent increase in customers to 19 million, making it unreliable as a source of long-term growth.

In the previous year, M-Pesa earned the company Sh11.8 billion which was about 12.5 per cent of the total revenue while voice earned Sh63.5 billion, or 67 per cent of the overall earnings.

In 2010, M-Pesa contributed nine per cent of Safaricom’s revenues, having jumped from 1.2 per cent in 2008.

In contrast, the data segment contributed 29 per cent of the revenue despite a downward review of broadband prices. Data and SMS brought in Sh6.6 billion and Sh7.8 billion respectively.

Mr Collymore said sustained growth would be hinged on the data segment which comprises M-Pesa, short message service and broadband in the face of low voice tariffs, high borrowing costs and foreign exchange fluctuations.

Over the next four years, the company plans to invest Sh13 billion in building its own fibre network to complement the leased capacity.

“We will continue investing in our network coverage and capacity improvement to cater for growth in broadband and in particular mobile broadband,” Mr Collymore said.

Despite the growth in all income streams, the net profit dropped four per cent from Sh13.2 billion the previous year because of high borrowing costs and intense inflationary pressure.

The company, however, said it would pursue a progressive dividend policy which aims at keeping the payout to shareholders at least at the previous year’s level.

For the year in question, the company will pay a dividend of 22 cents per share, a 10 per cent increase over the previous year.

Safaricom shares were on Thursday trading at Sh3.45 each following the announcement of the results, up from Sh3.30 on Wednesday.