Safaricom chief executive officer Bob Collymore (right), chairman Nicholas Nga’nga’ and chief financial officer John Tombleson (left) during a media briefing at Michael Joseph Centre in Nairobi on May 12. Photo/GERALD ANDERSON
What you need to know:
UK's Vodafone is the biggest beneficiary of the impending dividend windfall with Sh7.5 billion for its 40 per cent stake in Safaricom.
Vodafone will also bag at least Sh4 billion in service fees for proprietary rights it holds in M-Pesa service, whose revenues grew 21.6 per cent to Sh26.5 billion.
The Treasury is expecting a Sh6.5 billion dividend cheque for its 35 per cent stake.
Telecoms operator Safaricom Monday announced a record Sh18.8 billion dividend payout after it reported a 31.4 per cent jump in net profit for the year ended March.
The firm, which is Kenya’s largest mobile telecoms service provider, set yet a new earnings record in corporate Kenya with an after-tax profit of Sh23 billion.
Key segments of the operator’s business posted positive growth, confirming recent positive investor sentiments that saw Safaricom’s share price more than double to a peak of more than Sh13 in 24 months.
Bob Collymore, the chief executive, said strong growth in non-voice business including short message service (SMS), mobile internet and money transfer service M-Pesa had helped Safaricom to add nearly Sh7 billion to its profits in a year -- having reported Sh17.5 billion the previous year.
Safaricom’s parent firm Vodafone is the biggest beneficiary of the impending dividend windfall with Sh7.5 billion for its 40 per cent stake in the Nairobi Securities Exchange-listed firm.
Vodafone will also bag at least Sh4 billion in service fees for proprietary rights it holds in Safaricom’s M-Pesa service, whose revenues grew 21.6 per cent to Sh26.5 billion.
The Treasury is expecting a Sh6.5 billion dividend cheque for its 35 per cent stake, making the telecoms operator one of the most successful public investments in recent times.
The massive dividend payout is also good news for retail investors who have been earning only a few hundred shillings for their small holdings since Safaricom was listed in 2008.
At Sh0.47 per share, the payout is 51 per cent higher than the previous year’s Sh0.31.
In absolute terms, Safaricom’s Sh18.8 billion is the largest dividend ever to be paid by a publicly traded firm in NSE’s history.
Besides the strong earnings, investors in the telecoms operator also stand to benefit from a possible continuation of the share price rally at the Nairobi bourse.
Safaricom’s stock rose 32 per cent in the past six months to trade at Sh12.9, more than double the listing price of Sh5 in 2008 when most retail investors first bought into the firm.
Analysts at Standard Investment Bank (SIB), however, believe the stock is slightly overvalued, recommending a hold position to its clients and fixing the fair value at Sh12.5 or 2.9 per cent below the current market price.
“We think investors are pricing in a premium on financial services with M-Pesa holding a growing market position that is relatively well protected,” SIB said.
Safaricom’s performance was helped by a faster growth in sales compared to operating and direct costs. M-Pesa, SMS, and data services were the firm’s biggest revenue drivers, which are expected to remain on a steady growth path in the near term.
The telecoms operator’s revenues were up 16.5 per cent to Sh144.7 billion in the year ended March. Revenue growth was fastest in mobile internet which closed the year at Sh9.3 billion or 40.6 per cent higher than the previous year.
Safaricom’s operating and direct costs rose 14 per cent and 10.1 per cent to Sh31.7 billion and Sh51.9 billion respectively improving its margins to 64 per cent from 62 per cent the previous year.
Mr Collymore said mobile internet services present a huge growth opportunity for the firm with most data services consumed over handsets and other hand-held devices.
“Mobile data is one of the key drivers of future growth. We will endeavour to continue increasing smartphone and 3G device penetration through partnerships with vendors to offer quality and cost effective devices,” he said, adding that Safaricom “is now ready to roll out LTE (4G), subject to availability of spectrum, to deliver super-fast broadband to Kenyans.”
Growth in data consumption has also increased sales of data-enabled handsets including smartphones, earning the company Sh4.9 billion or 0.4 per cent more money than it earned from the business segment the previous year.
Short messaging services recorded the second fastest revenue growth at 34.1 per cent to Sh13.6 billion, underlining the impact of Safaricom’s aggressive sales drive during the year under review.
Fixed data services to corporate clients came in third with a growth of 21.8 per cent to Sh2.5 billion despite stiff competition from rivals such as AccessKenya.
Revenue from M-Pesa grew at the rate of 21.6 per cent to Sh26.5 billion to become the second largest contributor to Safaricom’s total revenues after the voice business.
Mr Collymore said Safaricom will aggressively push M-Pesa to take a larger share of Kenya’s emerging cashless payments system, setting the stage for a head-to-head battle with players such as Visa and MasterCard that offer plastic money settlements.
“Our priority this year is to commercialise this service by growing the number of active merchants and making Lipa na M-Pesa the preferred electronic payment platform,” he said.
The mobile money transfer and payment system has attracted new players including Equity Bank – the largest retail bank in the country—and it remains to be seen what impact the new players will have on M-Pesa’s growth.
Overall, non-voice revenue increased 25.3 per cent to Sh58.4 billion, eating into the voice business’ share of the total, which now stands at an all-time low of 60 per cent.
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Note: The results are not exact but very close to the actual.
