M-Pesa beats voice as Safaricom’s top earner


Safaricom chief executive Peter Ndegwa during the company's launch of 5G. FILE PHOTO | NMG

Mobile money platform M-Pesa has overtaken voice to become the biggest revenue earner for Safaricom #ticker:SCOM, underlining the growth of the financial service that was launched on March 6, 2007.

The platform’s revenue declined 2.1 percent to Sh82.64 billion in the year ended March, surpassing sales from voice which recorded a larger drop of 4.6 percent to Sh82.55 billion.

The telco’s net profit fell 6.8 percent to Sh68.6 billion in the review period, after the coronavirus crisis hit revenue from financial services and calls in the year to the end of March.

The Nairobi Securities Exchange-listed firm declared a final dividend of Sh0.92 per share, bringing its total payout for the period to Sh1.37 per share.

The payout marks a slight drop from the distribution of Sh1.4 per share the year before.

M-Pesa’s rise to the top came despite the telco zero-rating fees on transactions of Sh1,000 and below from March 16 to December 31 last year.

When charges were reinstated on January 1, Safaricom and the Central Bank of Kenya agreed on a review of the tariffs that saw fees for low-value transactions fall by up to 45 percent.

Voice revenue was meanwhile hurt by a drop in subscriber numbers besides discounts offered through the telco’s promotion dubbed “Tunukiwa”.

Chief executive Peter Ndegwa said the mobile money platform’s dominance will increase in the coming years, reflecting its growth opportunities and the maturity of the voice business.

“M-Pesa will keep growing just because there are more growth opportunities. Voice is a mature business and we expect it to decline slowly in the years ahead,” Mr Ndegwa said.

The financial service now accounts for 31.3 percent of total revenue of Sh264 billion, ahead of voice’s contribution at 31.2 percent in the review period.

M-Pesa has grown at a compound annual growth rate of 36.05 percent since the year ended March 2009 when it raked in sales of just Sh1.5 billion, representing 2.1 percent of total revenue.

The growth of voice had meanwhile decelerated, amounting to a compound annual growth rate of 2.65 per cent from 2009 when its sales stood at Sh58.79 billion and accounted for 83.4 percent of total turnover.

Safaricom’s results for the year ended March shows that M-Pesa now also beats voice by customer numbers, indicating that the multiple uses of the platform is helping it to grow its subscriber base at a faster rate.

One-month M-Pesa active customers rose 13.6 percent to 28.3 million while one-month active voice subscribers increased 6.9 percent to 27.5 million.

In its first month, M-Pesa had only 52,453 customers, 355 agents and transactions valued at Sh98 million or 5.3 percent of Sh1.8 trillion it is handling currently.

Started as a person-to-person cash transfer service, the platform has now grown to offer payments, credit, international remittances and business analysis and support.

Former chief executive Michael Joseph helped to popularise the innovative platform, driving the recruitment of the first wave of customers and merchants.

He also led engagements with regulators including the Central Bank of Kenya which allowed the nascent service to take off amid stiff opposition from banks.

His successor, Bob Collymore, built on those gains, including through partnerships with banks like NCBA to create mobile banking services M-Shwari and KCB (KCB M-Pesa).

Mr Ndegwa is poised to further grow M-Pesa locally and across the continent through the telco’s joint venture with its South Africa-based parent firm Vodacom Group.

Safaricom has made applications to offer additional services such as investments and insurance whose rollout awaits regulatory approval, Mr Ndegwa said. He reiterated the company’s commitment to its policy of distributing 80 percent of its net earnings.

“We are committed to investing in the business and maintaining a consistent dividend payout ratio in line with our current dividend policy,” he said.

Safaricom is projecting that its earnings could grow by double digits in the current financial year ending March 2022.

Earnings before interest and tax (EBIT) is forecast to fall in the range of Sh105 billion to Sh108 billion from the Sh96.1 billion posted in the year just ended.

Safaricom is awaiting the outcome of its bid for one of two Ethiopia telecommunications operating licences in an auction where its only rival is South Africa’s MTN Group.

Nine other firms that had expressed their interest in the auction dropped out at the last stage, with reports indicating that they were spooked by alleged lack of transparency in the process and requirements that winners build their own network infrastructure such as towers.