Safaricom posts Sh48b profit amid regulatory headwinds

From left: Safaricom PLC Chief Finance Officer Dilip Pal, CEO Peter Ndegwa, Board Chairman Adil Arshed Khawaja and Safaricom Telecommunications Ethiopia CEO Wim Vanhelleputte during the release of Safaricom Half Year Results in Nairobi, on November 7, 2024. [Wilberforce Okwiri, Standard]

Safaricom has recorded Sh28 billion profit after tax in the first six months of the 2024-25 financial year, boosted by strong performance in Kenya where profit increased by 18 per cent to Sh47.5 billion.

This came despite regulatory headwinds in Kenya and currency reforms in Ethiopia that weighed down earnings.

The telco reported Sh177.5 billion in service revenue, a 12.9 per cent increase over a similar period last year with Safaricom CEO Peter Ndegwa pointing to the strong performance in mobile data and M-Pesa revenue. 

“We operated under an extremely difficult period in both Kenya and Ethiopia, leading to accelerated pressure on our customers’ spending power,” Ndegwa said during the release of the financial results in Nairobi Thursday.

“This pressure is largely driven by global and local macroeconomic factors and political and social upheaval exerting pressure on consumer wallets.”

Data from the company’s latest financial reports indicates earnings before tax stood at Sh102.9 billion in the period under review, a 13.7 increase compared to last year with monthly active customers growing six per cent to 35.3 million. 

The firm reported double-digit growth across M-Pesa, mobile data, fixed service and voice at 16.6 per cent, 20.2 per cent, 14.7 per cent and 4.8 per cent respectively, with management revealing strong performance in its new insurance and asset management divisions. 

“We underwrote 22 million gross premiums in our insurance business amounting to Sh975 million in the first month of piloting the business stream, which indicates the growth potential of this business going forward,” said Ndegwa. 

Safaricom Insurance Agency, the firm’s subsidiary in the insurance industry launched operations in August this year after obtaining licensing from the Insurance Regulatory Authority.

The firm has started by offering embedded insurance on devices sold through its various channels. The depreciation of the Ethiopian Birr by 106 per cent this year also impacted the firm’s earnings, with Safaricom Ethiopia pushing forward its anticipated break-even date by another 12 months. 

“The Ethiopian Birr has depreciated by 106 per cent since the Ethiopian Central Bank implemented a floating exchange rate regime,” explained Safaricom’s chief financial officer Dilip Pal. “The Birr’s value against the US dollar was at 118.99 on September 30, 2024, from 57.693 in June 2024.” 

Safaricom said despite the impact on the firm’s earnings and expenses in the medium term, Ethiopia’s foreign exchange reforms will assist in easing dividend repatriation for the firm’s shareholders. 

The telco reported Sh319 million and Sh2 billion in voice revenue and mobile data respectively in Ethiopia, with monthly active customers standing at 4.4 million, a 73 per cent jump compared to last year. 

In Kenya, the firm reported strong performance on its payments and mobile data business, with the number of Pochi La Biashara merchants more than doubling to 869,000. 

However, the number of Lipa na M-Pesa merchants stood at 658,669, reporting the lowest growth at 0.03 per cent amid fears that the firm was in talks with the Kenya Revenue Authority (KRA) to integrate the payments system to the country’s tax registry.

In a public notice issued last week, the Communications Authority of Kenya (CA) said that all manufacturers, retailers and mobile network operators must upload the International Mobile Equipment Identity (IMEI) number of each device to a KRA-provided portal. 

“All mobile phone importers will be required to disclose the IMEI Number in their respective import documents submitted to the KRA,” said the CA notice.

“This disclosure is mandatory for the registration of the devices in the National Master Database on tax-compliant devices.”

Ndegwa said the company was still engaging the KRA on this directive with a view to balancing the government’s need to broaden the tax base and subscribers’ rights to privacy. 

“The objective of KRA is to see that the devices that are legitimately sold in the country pay taxes and my impression is that there has been a lot of feedback and I am sure KRA and the authorities are going to reflect on that feedback,” he said. “I am sure the KRA will look at how it is delivered so that whatever is done does not affect the subscribers’ privacy.”