Free cash transfers to cost Safaricom Sh5.5bn

Safaricom #ticker:SCOM will take a Sh5.5 billion hit on its M-Pesa revenue in the three months from mid-March after it waived transaction fees on mobile money transfers under Sh1,000.

The waiver was part of the quest for cashless payments to curb the spread of the coronavirus.

The foregone revenue is equivalent to 7.3 percent of M-Pesa’s annual sales. In the financial year that ended in March 2019, M-Pesa accounted for about a third of Safaricom’s Sh240.3 billion revenue.

This week, Safaricom CEO Peter Ndegwa, who took the reins on April 1, said the firm was not worried by the loss in sales, arguing it was part of the telco’s contribution in easing the effects of Coronavirus, which has killed 14 Kenyans and infected 281 people since the first case was reported on March 13.

In an interview with Citizen TV, Mr Ndegwa said: “These measures will cost us five and a half billion shillings over the next three months. The key is to ensure we can support our customers to get through this crisis. When Kenya gets back on track, our business should get back on track”.

Coronavirus has disrupted supply chains and local production, prompting the Treasury to forecast that economic growth will slow down to three percent or less this year from an earlier forecast of 6.1 percent.

Under an initial 90-day deal with the government, telcos and other firms involved in mobile money transfesr waived all charges for transfers of less than Sh1,000.

This was aimed at cutting down on the handling of cash and the attendant risk of the virus being transmitted from person to person.

It is expected that M-Pesa business could benefit from increased usage as customers shun bank notes during the crisis.

Mr Ndegwa said that it was still too early to make predictions.

“We are not factoring in any upside until we see how customers cope with this crisis,” he said.

Safaricom has experienced an increase in data traffic as people work from home and students turn to e-learning services. The firm last week said mobile phone data usage had grown by 35 percent as users streamed movies on platforms like Netflix, worked from home and used social media sites like Facebook.

Mr Ndegwa, who was Diageo’s managing director for continental Europe before taking over his new role, is betting on M-Pesa, data business and entry into other markets like Ethiopia to shape the firm’s future profitability.

“We want to democratise the use of data, whether it’s for education or other uses,” said Mr Ndegwa, while signalling cheaper internet and handsets.

M-Pesa has emerged as Safaricom’s profit driver in recent years in the face of sluggish growth in voice revenues where the firm has been shedding market share to its rival, Airtel Kenya, which is in merger talks with Telkom Kenya, the third largest telco in the country. In the last financial year, M-Pesa revenue grew by 19.2 percent.