How your Sh26 daily has lifted Safaricom's earnings to Sh329b

Safaricom CEO Peter Ndegwa (centre), Chief Finance Officer Dilip Pal (left) and Safaricom Telecommunications Ethiopia CEO Wim Vanhelleputte during the release of the telco's 2023-2024 full-year financial results in Nairobi. [Wilberforce Okwiri, Standard]

Twenty-six shillings may not appear much, especially in the context of telecommunications firm Safaricom which has just reported record-breaking revenues of Sh329 billion for the financial year ending March 2024.

It is however this Sh26 paid every day by the 34.3 million subscribers in Kenya that has pushed the firm to report its first billion-dollar earnings, despite huge costs in setting up shop in Ethiopia.

Safaricom’s after-tax profits grew by 13.7 per cent - from Sh73.1 billion reported last year to Sh84.7 billion recorded in the year ended March 2024, on the back of increased M-Pesa and mobile data revenues.

“We had an outstanding year in Kenya,” said Safaricom Chief Executive Officer Peter Ndegwa. “Our Kenyan operation is now a $1 billion business in earnings before interest and taxes which has hit Sh140 billion, a 20 per cent growth year-on-year.” Mr Ndegwa said the firm’s sterling earnings outperformed expectations even at the group level, with the start-up costs from the Ethiopian operation taken into account. 

Safaricom’s net income of Sh84.7 billion from the Kenyan business alone is more than that reported by leading banks KCB Group and Equity Group combined. Service revenue reported a 12 per cent increase compared to last year to stand at Sh331 billion with M-Pesa and mobile data the biggest growth drivers. 

The number of one-month active customers on M-Pesa went up by 1.5 million compared to 2023, with the average revenue per user on the service increasing from Sh750 to Sh814. 

“The re-introduction of charges on M-Pesa transactions to and from banks enhanced our M-Pesa revenues,” said the firm’s Chief Financial Officer Dilip Pal. “We have revised down our M-Pesa tariffs by 61 per cent with re-introduced charges from bank to wallet. Overall we have a growth in users, transaction value and monthly revenue per user.”

Consumer payments accounted for the majority of earnings on M-Pesa raking in Sh90 billion followed by business payments at Sh38.2 billion with financial services bringing in Sh7.9 billion, a 9.2 percent drop compared to the previous year. “Financial services, which are basically the credit products, declined primarily due to price optimisation of our Fuliza product,” said Pal. “If you exclude Fuliza, the revenue grew 23.9 per cent.” Safaricom says this was driven by the need to make the service more affordable and accessible to more consumers. 

In October 2022, Safaricom and lending partners NCBA and KCB Bank announced they were restructuring the product and cutting Fuliza tariffs by 50 per cent. This included a waiver on daily maintenance fees for the first three days for customers making Fuliza transactions valued at less than Sh1,000 and reductions in daily maintenance fees for transactions above Sh1000 and up to a maximum of Sh70,000.   

Fuliza disbursement grew by 18.9 per cent in the year under review with a total of Sh834 billion lent out. Revenue from the service however went down from Sh5.4 billion in 2023 to Sh3.9 billion with the total number of customers falling by one million, to 7.1 million.

 Revenue from mobile data stood at Sh63.2 billion recording an 18 per cent increase compared to 2023 driven largely by 4G usage which grew by almost 30 per cent. 

Safaricom says more than 700,000 customers are now on 5G devices and the firm now counts 1.5 million devices on its smart meter project with the firm keen on pushing into new growth areas like artificial intelligence (AI) and the Internet of Things (IoT). 

The telco also reported strong growth in its Ethiopian business with the number of 90-day subscribers more than doubling from 2.1 million in the previous year to 4.3 million in the financial year that ended in March 2024. Safaricom Ethiopia reported Sh5.7 billion in service revenue including Sh4.1 billion and Sh1 billion from mobile data and voice respectively. M-Pesa revenue in Ethiopia stood at Sh91.9 million with revenue from SMS standing at Sh42.3 million. 

“We have sustained the commercial momentum, driven by steady network rollout, now covering 40 per cent of the population in Ethiopia, and growth of customers to over 9.4 million gross additions since inception,” said Ndegwa.

“Additionally, M-Pesa already has over 4.5 million registered customers and is growing rapidly.” Safaricom board has recommended an interim dividend of Sh22 billion and a final dividend of Sh26 billion bringing the total payout to shareholders to Sh46 billion.

Safaricom shares at the Nairobi Securities Exchange rose by up to three per cent following the release of the financial results.