Safaricom sets sights on fast growth of ‘Lipa na M-Pesa’
Telecoms operator Safaricom Monday announced a record Sh18.8 billion dividend payout after it reported a 31.4 per cent jump in net profit to Sh23 billion for the year ended March.
Safaricom said the record profits had come on the back of strong growth in non-voice business including short message service (SMS), mobile Internet and money transfer service M-Pesa.
At Sh23 billion, Safaricom added nearly Sh7 billion to its profit in a year — having reported Sh17.5 billion the previous year.
Bob Collymore, the chief executive spoke to Okuttah Mark on the industry’s outlook and how Safaricom plans to maintain its profits momentum in the coming years. Here are excerpts from the interview.
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Safaricom’s voice service revenue grew to Sh86.3 billion and accounted for 62 per cent of your service revenue down from 66 per in the previous year, what explains this decline?
The decline is mainly arising from the new subscribers we added in the year whose average revenue per user (ARPU) is lower compared to our old subscribers.
We are also seeing the voice contracting as subscribers shift to messaging services such as WhatsApp. But it is important to remember that these realities did not prevent the voice revenue from growing by a robust 11 per cent.
Kenyans do not use their mobile phones for luxury activities but as an essential tool for production. This effectively means that when life becomes tougher they reduce the amount they spend on food but retain the communication budget.
The government is one of the biggest beneficiaries from the impressive financial results and must be delighted by the Sh6.6 billion dividend cheque you are about to write it. How do you feel about this?
I think it is very positive that we are the biggest dividend payer to the government. Apart from the Sh6.6 billion dividend, last year we paid a total of 47.5 billion in taxes, spectrum fees and duties taking our total contribution to the exchequer past the Sh50 billion mark.
With this kind of a relationship, does it make it harder for the Communication Authority of Kenya (CAK) to regulate Safaricom?
We have a very healthy relation with the regulator. The government and CAK are actually two separate things. CAK is an independent authority. Director general Francis Wangusi and I are sometimes very good friends and sometimes really bad enemies, but I respect the work that the DG (Wangusi) does and I think he also respects what I do.
I think there is a natural tension that exists between the regulators and the entities they regulate.
Some of the newly licensed mobile virtual network operators (MVNO) have indicated they will charge lower voice rates compared to the current tariffs. Is Safaricom prepared for another round of price wars?
We believe in offering quality services; I don’t see how low they can go because already we have operators offering free calls, which we have all seen is not sustainable. Not unless the MVNO say they will be paying subscribers for using their lines.
What strategies do you have to counter this kind of competition?
We remain steadfast in our goal to provide the best network experience supported by significant investments in fibre roll out and network modernisation.
We continue to focus on our “Best Network in Kenya” programme. We invested Sh27.8 billion in the network in the year under review and our goal is to provide the best customer experience through improving our network quality, capacity and coverage.
Safaricom is mulling a possible scrapping of its lower end post-paid services (those currently paying Sh1,000 and Sh2,500). What is the logic behind this move?
This was a tactical tariff we came up with during the price war period, but to be honest it is not earning us any money.
We are planning to restructure it subject to an approval from the regulator. It is, however, important to note that we are still offering the other post-paid plans.
M-Pesa and data seems to be your key growth drivers. How do you plan to increase their uptake in this competitive market?
M-Pesa is at the forefront in deepening financial inclusion in Kenya. In the past year, we launched the revolutionary Lipa na M-Pesa service that enables our customers to carry out day-to-day transactions on a cashless basis.
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.
This will make a significant contribution to the lives of our customers and accelerate Kenya towards a cash-lite economy. Currently we have 122,000 Lipa na M-Pesa merchants recruited and 24,137 actively using the service.
On data, we are now ready to roll out LTE (4G), subject to availability of spectrum, to deliver super-fast broadband.
This will extend the reach of data and the Internet, including the provision of WiFi access to schools in support of the government’s digital education programme. We have had successful LTE trials in 10 sites within Nairobi and Mombasa, realising 70Mbps data speeds.
We will also be increasing smartphone and 3G device penetration through cost effective quality offers and continue with our great push on relevant content, social media and applications.
Safaricom’s licence is coming up for renewal next month. Have you reached any agreement with the industry regulator, especially on the quality of service?
The negotiations went well and we reached an agreement with the regulator on most of the conditions.
On the quality of service we agreed that CAK should engage an independent firm to conduct an independent fresh study.
