Companies

Vodafone, Treasury to pocket Sh22bn Safaricom dividends

MPESA

A client being served at an M-Pesa agent. M-Pesa revenues grew 27 per cent to Sh41.5 billion with an average of Sh14 billion transacted through the platform daily. PHOTO | FILE

British firm Vodafone and the Treasury are set to pocket Sh22.8 billion in dividends from Safaricom after the telecommunications giant declared a Sh38.1 billion profit and offered to pay owners Sh0.76 for every share held.

At Sh38.1 billion, Safaricom’s net profit for the year ended March was 20 per cent higher than the Sh31.8 billion it reported last year, giving the management reason to increase the dividend payout by an equal margin from last year’s Sh0.64 per share.

READ: Safaricom net profit rises 20pc to Sh38.1 billion

“In light of the strong financial performance the board recommends a dividend of Sh0.76 per share — an increase of 18.9 per cent. We will pay out a dividend of Sh30.4 billion, which represents 80 per cent of our net income,” said the company’s chief executive, Bob Collymore.

Vodafone is the largest shareholder in Safaricom with a 40 per cent stake and is entitled to Sh12.1 billion in dividends, while the Kenyan government is poised to pocket Sh10.6 billion for its 35 per cent ownership.

The Sh38.1 billion profit is nearly double the Sh19.6 billion that KCB, the second-most profitable company in Kenya, reported for the same period, underlining Safaricom’s unrivalled position as a profit-making machine. 

READ: KCB reports Sh19bn profit despite Sh6bn South Sudan hit

Safaricom’s total revenue increased by nearly 20 per cent to Sh195.7 billion, mainly driven by non-voice services such as M-Pesa and data, which at 49 per cent now constitute nearly half of the company revenues.

M-Pesa revenues grew by 27 per cent to Sh41.5 billion with an average of Sh14 billion transacted through the platform daily. M-Pesa users grew by 20 per cent to 16.6 million who transacted Sh5.3 trillion during the year. Safaricom paid out a total of Sh14.6 billion to its 100,744 M-Pesa agents.

The 25.1 million Safaricom users spent Sh90.8 billion calling each other up from Sh87.3 billion last year while short text messaging (SMS) yielded Sh17.3 billion in revenues compared to Sh15.6 billion a year earlier.

Safaricom said it had changed its customer recognition standard to include those who had contributed revenue in the last 90 days, down from the 220 days standard it has been using in the past.

“This removed 1.7 million inactive customers from reporting, in what was otherwise a record-breaking year for customer number additions,” said Standard Investment Bank.

The growth in SMS revenue of 10.6 per cent was registered amidst growing competition from WhatsApp messaging service.

Mr Collymore said Safaricom was looking at improving its data services to ensure it benefits from the increased usage of WhatsApp, which has a richer messaging mix including videos and images and is heavily encrypted to safeguard the privacy of users.

READ: Tech companies upgrade security systems to ensure privacy of users

Safaricom’s revenue from sale of data bundles grew at the fastest rate of 42.7 per cent to Sh21.1 billion which Mr Collymore believes could be nurtured to compensate any loss of short text messaging income.

“This segment was greatly boosted by 128 per cent growth in smartphone users to 7.8m which resulted in a 77 per cent increase in mobile data usage per customer while the average price per MB declined by a third,” said Raymond Kipchumba, an analyst with ABC Capital.

Safaricom acknowledged that the entry of sports betting had also contributed growth in M-Pesa and SMS revenues as well as data usage.

M-Shwari, a partnership between Safaricom and CBA, disbursed Sh10 billion in loans while collecting Sh8.1 billion in savings from 3.9 million active customers.

KCB-M-Pesa, its partnership with KCB launched early last year, had 730,000 customers with Sh190 million deposits and Sh1.4 billion in loans.

READ: KCB's phone-based loans hit Sh7.8bn

Bad loans under M-Shwari stood at 1.9 per cent while KCB-M-Pesa’s non-performing loans were at 3.6 per cent.

Revenue from Okoa Jahazi, the emergency top-up service, rose 21 per cent to Sh3.1 billion. Safaricom charges a flat rate of 10 per cent for the emergency top-up service, indicating it made approximately Sh318 million from the credit service.

The telecoms company disclosed that it spent Sh9.2 billion in construction of the National Police Service security network for which it is yet to bill the government.

The billing set to be done this month will, however, not impact its financials as it had recognised revenue of a similar amount. Safaricom built the system and has since handed it over to the government but expects to earn some money in the form of a management fee. 

READ: Safaricom hands over CCTV system to police this week

Mr Collymore said the company spent Sh32 billion on infrastructure improvement. Some of the areas the company invested its money in includes expansion of 2G, 3G and 4G networks to support customer growth as well as the rollout of fibre cable.

Safaricom’s 4G network currently covers 20 counties, its 3G network covers 80 per cent of the population while 2G coverage stands at 95 per cent.

The telecoms giant has earmarked additional Sh33 billion for infrastructure development this year as it looks to grow its earnings before interest, tax, depreciation and amortisation to Sh92 billion.

The company is looking at improving its Lipa na M-Pesa service, whose uptake also grew to pay for Sh20 billion worth of goods and services in March up from Sh11.4 billion in the same month last year. The company has 44,000 merchants on Lipa na M-Pesa.

The dividend payout stirred the market where Safaricom’s share price rose to Sh17.10 per unit from Sh16.95 in the previous trading session.