Higher calling rate to raise Safaricom second half profit
Safaricom CEO Mr Bob Collymore (pictured). Safaricom’s decision to raise its calling charges last October is expected to lift its second half performance, but analysts are expecting a slight dip in full-year earnings to be released this morning. PHOTO/ FILE
Safaricom’s decision to raise its calling charges last October is expected to lift its second half performance, but analysts are expecting a slight dip in full-year earnings to be released Thursday morning.
The company’s net profit for the six months to September declined 47.4 per cent to stand at Sh4 billion on the back of a surge in operating costs influenced by the weakening shilling and reduced revenues from voice calls. This prompted the leading mobile operator to increase its tariffs by an average of 25 per cent on October 1, a day after the end of its first half trading period, which analysts expect will lift its second half performance.
“The increase in tariffs will not completely reverse the drop, but we expect to see the drop come down to between 20 and 15 per cent,” said Eric Musau, an analyst at Standard Investment Bank.
“Safaricom could have already issued a profit warning if the profits drop would have been above 25 per cent.”
Analysts at Kestrel Capital echoed similar comments in a performance that is likely to shape its share price that has remained static at about Sh3.50 over the past year.
“We expect a range of between 18 and 23 per cent in the drop in profits which is an improvement from the first half year drop of 47.4 per cent since earnings in the second half are more favourable,” said Gregory Waweru, an analyst at Kestrel Capital. Investors will be keen on the operator’s dividend payout that has maintained a upward trends since its listing in 2008.
It paid a dividend of Sh4 billion in 2009 and Sh8 billion in 2010 and 2011, but its share has remained below the psychological IPO price of Sh5.
Data from the Communication Commission of Kenya (CCK) places Safaricom’s marketshare at 77.86 per cent in the quarter to December from 88.27 per cent in the three months to September.
The drop was attributed to its tariff rise, which also the call minutes on its network to 5.2 billion minutes in the three months to December compared to 6.2 billion minutes in quarter to September, reflecting a drop a 16 per cent drop.
This helped its rivals, whose rates remained static, and lower than Safaricom’s, to gain marketshare, with Airtel nearly doubling its stake to 12.7 per cent in December compared to 6.6 per cent in September.
Essar grew its share to 8.6 per cent from 4.58 per cent while Telkom Kenya increased its stake to 0.8 per cent from 0.6 per cent in the same period.
Analysts, however, reckon that the drop in Safaricom’s voice stake is unlikely to hurt second half performance since the fall in airtime usage by the minute was lower than the tariff increment.
