Safaricom will maintain the policy of paying 80 percent of its net profits as dividends despite a growing debt portfolio that will see the telecom firm borrow Sh40 billion through a green bond.
The operator has started selling its first tranche of Sh15 billion of the green in a fundraiser that will push its total borrowings to at least Sh130 billion.
Safaricom states that the extra debt will not impact its dividend payouts, as it will not alter its profit outlook.
It has paid a dividend of Sh48 billion in each of the last three financial years, making it one of the best-rewarding counters at the Nairobi Securities Exchange, and a driver of its share price.
Safaricom’s borrowings at the end of March 2025 stood at Sh107 billion, constituting Sh64.7 billion in long-term loans and Sh42.6 billion in short-term liabilities.
The listed telco can accept an extra Sh5 billion if the first tranche offer gets oversubscribed in what is called a greenshoe option.
The company disclosed it will use some of the proceeds of the bond to refinance the more expensive Sh30 billion syndicated loan borrowed from four commercial banks.
“No it doesn't change our dividend policy. Our net debt to Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) is not changing much so our dividend policy remains 80 percent of net income after adjusting minority interest,” said Dilip Pal, Safaricom chief finance officer.
Safaricom has a window to use part of the proceeds of the green bond to clear some of its debt obligations, which were used for green projects.
The green bond allows for the refinancing of sustainable projects undertaken in the last 36 months. Safaricom borrowed Sh15 billion in 2023 for sustainable projects and an additional Sh15 billion last year.
“We have the flexibility as part of the programme. The exact amount of that - how much will be allocated for the refinance is not available right now. We will share that later,” said Mr Dilip.
So-called green bonds are fixed-income securities that raise capital for projects in renewable energy, energy efficiency, green transport and waste-water treatment.
Safaricom is raising the funds to carry out sustainability projects in Kenya and Ethiopia.
The projects are hinged on five pillars, which are energy efficiency, use of renewable energy, green buildings, pollution prevention and environmentally sustainable management of living resources and land use.
Safaricom is using the proceeds of the bond to improve its energy efficiency by transitioning its base stations to solar power, deploying 5G, and replacing its legacy network that has been in use for over 25 years.
It has transitioned 1,400 of its 7,000 sites to solar power and installed systems to switch off the stations during idle time. The telco is working on lowering its reliance on Kenya Power for electricity needs.
“Network operating cost is the largest cost for a telco and within network operating cost 50 percent is energy cost,” said Mr Dilip.
Safaricom’s network operating costs were Sh24.1 billion for the year ended March, signaling its energy costs are well above Sh10 billion annually.
The modernisation process has the sites running on solar and have batteries that can last upto four hours with Kenya Power being the third option and generators last.
Data centres, which are also huge power consumers, are being transitioned to solar power along with other energy efficiency measures. Safaricom is also seeking billions of shillings to broaden its 5G networks as it ramps up its data business to offset a decline in mobile calls, where it has seen a small revenue fall due to saturation.
Safaricom reported a 52.1 percent rise in its half-year profit to Sh42.7 billion, helped by a smaller loss in Ethiopia and M-Pesa’s double-digit growth.
Its net profit grew from Sh28.11 billion the previous year, and it expects to declare an interim dividend in February.
The Kenya business continued to be the main profit driver on the back of M-Pesa, the firm’s largest unit and on course to generate half of the telco’s revenues.
Its reported loss in Ethiopia dropped by 59 percent compared to the first half of the previous financial year, which was heavily impacted by a depreciation of the birr currency.
The loss in Ethiopia that is attributed to Safaricom dropped to Sh15.2 billion from Sh19.4 billion in the same period a year earlier, translating to a gain of Sh4.2 billion.
Safaricom launched in Ethiopia in 2022 as the Addis government opened up the tightly-controlled economy to foreign competition and is hoping its presence in Africa's second most populous country will power future growth.
Its diversification from the saturated voice and SMS business is paying off, with M-Pesa, mobile data and fixed internet emerging as sales drivers.
Safaricom’s revenue rose to Sh199.9 billion in the six months to September, from Sh179.9 billion in the same period a year earlier, reflecting a 11.1 percent growth.
Revenue from mobile financial service M-Pesa rose to Sh88.1 billion from Sh77.2 billion previously, reflecting a growth of 14 percent.
