Kenya - Safaricom has seen a 13% drop in pre-tax profits due to rising costs

[afrique en ligne] Kenya-Telecommunications - Mobile operator Safaricom yesterday reported a 13 per cent drop in pre-tax profit for the full-year 2010 as costs rose faster than revenue growth mainly because of a bigger payroll and marketing spend. Profit before tax stood at Sh18.3billion down from the record Sh21billion recorded the year earlier. Revenues, however, climbed 13 per cent to Sh94billion in line with analysts' prediction fueled by strong growth in non-voice revenues services; M-PESA, SMS and data. Speaking during an investor briefing yesterday, CEO Bob Collymore said Safaricom's strategy of diversifying from being merely a voice company was paying off. "Our strategy to diversify and grow non voice revenue is paying off as attested by the impressive growth of data and MPESA and this trend is expected to be amplified in the future," Collymore said.

M-PESA revenues jumped 50 per cent to Sh12billion while mobile and fixed data revenue rocketed by a massive 466 per cent to Sh5.4billion to buoy static voice revenues which stood at Sh63billion.

Analysts hailed the results terming them better than expected given the competitive business environment telecoms operated in during the year under review. Safaricom could have done much better but for a surge in costs.

A 25 per cent jump in operating expenses to Sh45.7billion up from Sh36.5billion as well as depreciation charges meant that earnings before interest, tax, depreciation and amortization fell from Sh36b.6billion to Sh35.7billion.

The board approved a dividend payout of Sh8billion which works out to 20 cents a share or 60 per cent of profit after tax. Last year the company paid out 50 per cent of its taxed profits as dividend and reinvested the rest.

With capital expenditure on infrastructure such as network expansion expected to remain or surpass the Sh25.3billion spent last year, management yesterday indicated it may be in the market for funds either from the capital markets or through loans. "Our balance sheet is still very underleveraged," Collymore said.

Going forward Collymore said the company would segment its customers for better targeting with products. Nkore Mwebesa of CFC Stanbic Financial Services praised the performance. "I think the results are pretty good under the circumstances. The fact that they have been able to grow revenue (despite the tariff wars) is commendable ," Mwebesa said. "It was better than expected. Most of the investors we spoke to I think they are yet to grasp the strategy especially the impact of non voice revenues." Aly Khan Satchu of Rich Management concurred. "It was better than I expected. I had a lower number," said Satchu.

Telecommunications-Kenya: Safaricom Profits Drop By Sh2.7 Billion