Vodafone, Vodacom reap Sh22b from Safaricom dividend payout

Safaricom PLC shareholders during the company’s 11th Annual General Meeting at Bomas of Kenya. [Wilberforce Okwiri, Standard]

UK-based Vodafone Group Plc and its subsidiary Vodacom will earn Sh21.9 billion from the Sh54.89 billion dividend payout that Safaricom will make to shareholders for the year ended March 2021.

This follows a move by the company’s shareholders to approve Sh18 billion in interim dividends and a final dividend of Sh36.8 billion for the period under review.

The payment represents a Sh1.37 payout on each ordinary share and is among the highest to be made to shareholders by a Kenyan listed firm in the recent past.

"During this year, the board declared, for the first time, an interim dividend of Sh0.45 per ordinary share held, amounting to Sh18.03 billion,” explained the company in a note in its latest annual report.

“This was not only in recognition of our solid half-year performance but also to support our shareholders during a tough economic time."

Treasury, which owns 35 per cent of the listed telco, will earn Sh19.2 billion as its share of the dividends.

The majority of the company’s retail investors will earn less than Sh1,370 as 358,365 (65 per cent) out of the company’s 544,007 registered shareholders hold less than 1,000 shares.

The dividend payout is also subject to withholding tax at the rate of 10 per cent for non-residents and five per cent for Kenyan residents.

According to the company’s financial records, Safaricom paid Sh105.9 billion in taxes, duties and license fees last year, making the telco the biggest corporate cash-cow for the National Treasury.

The company reported Sh68.67 billion in profit after tax for the year ended March 31, 2021, a six per cent drop compared to Sh73.6 billion reported in the previous year.

Total revenue stood at Sh264 billion for the year ended March 31, 2021, registering a marginal 0.3 per cent drop from earnings reported in the previous year which was attributed to the effects of the Covid-19 pandemic.

The demand for connectivity as more Kenyans worked and schooled from home however boosted the company’s mobile data revenue to Sh44.7 billion, up from Sh40.1 billion registered in 2019.

Fixed-line and wholesale transit revenue also went up from Sh8.4 billion recorded as at the end of March 2020, to Sh9.5 billion in March this year.

Safaricom Chief Executive Peter Ndegwa told shareholders that the company would continue investing in digital and mobile money offerings that promise sustained earnings in the coming year.

“We have set our sights on the health, agribusiness and education sectors as well as broadening our financial services beyond payments to benefit consumers in new ways,” Ndegwa told shareholders.

He said the company is on track to achieving 100 per cent 4G coverage and is making good progress with the 5G and fibre network rollout.

"We are well placed to expand our fibre infrastructure to support up to a million homes over the next five years, assisting the drive towards working and learning from home that underpins the new normal,” he said.

Safaricom shareholders also approved the company’s formation of the Vodafamily Ethiopia Holding Company that resulted in the special purpose vehicle company Global Partnership for Ethiopia B.V incorporated in the Netherlands to launch operations in Ethiopia.

Earlier in the year, the Ethiopia Communication Authority accepted the Sh90 billion bid Safaricom and consortium partners Vodacom, Vodafone, Sumitomo and CDC had placed for second nation-wide telecommunication services.

Safaricom CEO told shareholders the firm will finance its share of capital for the consortium’s operations in Ethiopia through internal funding and external borrowing. 

“The Safaricom-led consortium will establish an operating company in Ethiopia and commence operations in 2022,” explained Ndegwa.

"At commencement, much of the technology and commercial skills will be provided by seconded experts with the intention of passing these skills onto talented Ethiopian recruited to develop a business that is truly Ethiopian."

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