Businesses & Financial News

Safaricom’s H1 profit up 12.1pc on increased borrowing

By Remie Otieno

Telco operator Safaricom Plc. Wednesday announced an improved performance, posting 12.1 percent growth in net earnings in the first six months of the year, despite the Covid-19 concerns.

The firm saw net profit grow to Sh37.1 billion covering the period between April and September compared to Sh33 billion it announced in a similar period last year.

It attributed that growth to increased borrowing through Fuliza and improved transactions via Lipa Na Mpesa – avenues that drove M-Pesa revenues.

M-PESA revenue recorded strong performance growing 45.8 percent following the return of person to person and Lipa Na M-PESA transactions below Sh1, 000 beginning January 2021. Total transaction value grew 51.5 percent to Sh 13.7trillion.

In March last year, the country’s apex bank, the Central Bank of Kenya (CBK) announced emergency measures to facilitate increased use of mobile money transactions instead of cash, as a way to curb the virus spread.

The directive saw all M-Pesa transactions of up to Sh1, 000 discharged at no cost. Kenyans sent a high of Sh4.4 trillion for free when the waiver of fees subjected to such transactions were announced between March 16 and December 31 last year on the platform.

“Innovation in digital financial services has been a key growth driver for M-PESA. We continue leveraging on technological innovation to enhance access to financial services for consumers and enterprise customers,” said Safaricom’s Chief executive Peter Ndegwa.

Also felt to have contributed to the firm’s impressive earnings, is improving consumer confidence and business activity boosted by COVID-19 vaccination efforts as well as positive macro-economic projections by the World Bank which forecast the GDP to rebound strongly at 6.3 percent by December 2021.

“In spite of the past year being one with far-reaching changes and extraordinary circumstances given the pandemic, the board is encouraged by the business resilience and recovery trajectory marked by a return to near normalcy,” commented Safaricom’s Board Chairman Michael Joseph.

The operator has however, highlighted a host of barriers to its operations, citing increasing regulatory scrutiny, taxation- adjusted excise duty on telco products, looming general elections and political risk as well as mounting pressure on currency and consumer spending due to rising inflation, as some of its fears.

Other include the ongoing conflict and civil unrest in Ethiopia in what the company fears will disrupt its operations in the populous nation.

Safaricom on Tuesday evacuated some of its employees to Nairobi using commercial flights with more others scheduled to arrive in the country this week.

The telco, alongside other partners is seeking to start Ethiopia operations next year, and will then gradually reduce Kenyan expertise and build the local workforce as the business grows.

The debate around the firm’s market dominance also threatens to expose its brand image, even though Safaricom has a huge backing from the regulators Communications Authority (CA) and Competition Authority of Kenya (CAK) amid protest from smaller player.

Last week for instance, rival subscriber Airtel Kenya Airtel claimed that CA’s unwillingness to declare Safaricom a dominant provider, had made it difficult for the company to compete commercially in the sector.

In a 15-page presentation to the Senate Committee on ICT, the operator also accused CA of intentionally subscribing favours to Safaricom in spectrum allocation, despite heavily investing on the network to improve customer experience.

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