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Safaricom SMS sales overtake rivals’ voice units

Safaricom Customer Care Centre on Moi Avenue, Nairobi. FILE
Safaricom Customer Care Centre on Moi Avenue, Nairobi. FILE  NATION MEDIA GROUP

Safaricom earned more than Sh3 billion from the Short Message Service (SMS) sent in the quarter to December, making the sector a larger business than rival’s entire voice operations.

Latest Communication Commission of Kenya (CCK) data show that the operator accounted for 93.7 per cent of the 3.6 billion texts sent in three months to December, representing a three-fold growth given the one billion sent in the quarter to September.

Safaricom charges one shilling per text, an indication that it earned more than Sh3 billion from the 3.46 billion texts sent from its network when one accounts for discounts.

Subscribers of Kenya’s second largest mobile operator Airtel made calls amounting 918 million minutes in the quarter—which earned the operator nearly Sh2.5 billion in sales.

Safaricom on Friday signalled that the firm could have earned more than Sh3.4 from the SMS business.

‘‘Unfortunately we are in a close period until May 14 so I can’t comment, but don’t forget that during the period (September to December) we had the unlimited bundle,” said Bob Collymore, the CEO of Safaricom in reference to the Sh3.4 billion sales from the SMS service.

The closed period is tied to the release of full year results mid next month for the period ended March and the unlimited bundle allowed subscribers to send unrestricted text messages for a daily charge of Sh8.

The Communication Commission of Kenya (CCK) said that each subscriber sent 40.1 SMS per month during the period, which places the daily average at 1.3.

These metrics are leading analysts to believe that Safaricom emerged the key beneficiary of the unlimited offer as it races to reduce the contribution of the competitive voice business to its sales.

In the year to March, the SMS business contributed Sh7.8 billion, which is equivalent to three per cent of Safaricom’s revenues of Sh107 billion. It had a target to grow this business to Sh9 billion in the year to next March.

The voice business accounted for Sh68 billion, while M-Pesa brought in Sh16.9 billion with the data and handset businesses grossing Sh6.5 billion and Sh6.8 billion respectively.

Safaricom is estimated to have earned Sh22.3 billion from the voice business on the 5.7 billion call minutes it grossed—earning it a 77.5 per cent market share based on traffic.

The firm is expected to post a double-digit growth in profits for the year ended March on increased traffic and the fact that the entire 12 months will be covered by the higher tariff of four shillings after increasing rates in October 2011.

Safaricom profits dropped four per cent to Sh12.6 billion last year and its share has more than doubled over the past year to Sh6.60 apiece. The three-fold growth in the use of SMS happened in a quarter when growth of the voice business remained in the single digit.

The minutes of usage in voice during the same period grew to 7.3 billion from seven billion in the previous one, reflecting a growth of 4.2 per cent.

“The growth in SMS traffic could be attributed to the reduced prices as the Communications Commission of Kenya continued to implement the SMS termination rates glide path,” the CCK said.

SMS costs have fallen, but the operators led by Safaricom and Airtel have increased voice tariffs to boost profits and end a two-year price war.
Airtel subscribers sent 164,555,603 messages, earning it a 4.5 per cent market share.

yuMobile subscribers made 44,080,190 (1.2 per cent) while Orange subscribers sent the least messages, 17,528,578, (0.6 per cent).
 

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