[daily nation] Kenya's mobile phone giant, Safaricom, has set another record with Sh20.9 billion earnings in profit for 2009.
The company grew its pre-tax profit by 37 per cent, from Sh15.3 billion last year, driven largely by data business, especially its revolutionary M-Pesa money transfer service.
According to financial results released on Wednesday, M-Pesa, now three years old, raked in Sh7.5 billion in the period under review, more than double what it earned the previous year. Short message service (SMS), which many mobile phone users believe is a cheaper way of communicating, earned the company Sh5.1 billion.
The mobile money transfer service has moved Sh405.5 billion since inception in March 2007, according to company figures. Person-to-person transactions (where virtual cash moves within the system without being withdrawn) for March 2010, the firm noted, stood at Sh28.59 billion.
M-Pesa has hugely been successful with 9.48 million registered users. The man behind Safaricom's money-machine defended the higher-than-expected profit, which makes it the best performing company in East Africa and places it among the top on the continent.
"Compared to our peers in the region, our profits are very normal," said Safaricom CEO Michael Joseph. "However, locally they appear super because our closest competitors record losses as we register profits." With a dividend growth of 100 per cent, the firm's shareholders will be paid 20 cents dividend per share from the Sh8 billion it has declared as dividends for the year.
In the 2008 financial year, the company paid out 10 cents with a huge chunk of the local retail shareholders accounting for 37 per cent of the shareholder roll, taking home Sh500 or less in dividend. The government of Kenya and Vodafone Kenya will be the biggest beneficiaries with a combined shareholding of 75 per cent.
Its share at the Nairobi Stock Exchange (NSE) sold at Sh5.70 yesterday after the results, from Sh5.40 on Tuesday. "Its performance was above expectations," said Mr Einstein Kihanda, an investment expert at Sanlam Investment. "It's hard to predict the share performance but its diversification into data gives it a long-term stability."
He said there was huge potential in the data business. "Safaricom is a major player in data," said Mr Kihanda. "It's not just relying on voice for revenue." During the 12-month period, the company's total revenue grew by 19.1 per cent to Sh83.9 billion from the previous Sh70.4 billion.
Earnings from data -- which includes SMS, M-Pesa and Broadband services for both mobile and fixed access - expanded 24.5 per cent to Sh15.7 billion. The huge earnings come at a time when pressure is mounting to rein in Safaricom's dominance in the market, with the Communication Commission of Kenya publishing stringent rules for the industry.
The controversial rules were met with stiff resistance from Safaricom, which won round one of the battle when the government suspended their implementation. As far as earnings go, Safaricom is in a class of its own. The closest company at the NSE in terms of earnings is East African Breweries Ltd, at Sh11.9 billion for 2008 verses Safaricom's Sh15.3 billion.
Voice market still remains their largest revenue earner, even though its growth slowed, earning Sh63.4 billion from Sh58.7 billion the previous year. This was salvaged by the additional 2.43 million new subscribers.
Kenya: Sh21 Billion and Rising - Safaricom's Big Score