Safaricom First-Half Profit Surges as Voice, Data Sales Jump

Safaricom Ltd. (SAFCOM), East Africa’s biggest mobile-phone operator, said first-half profit almost doubled after voice and data revenue jumped as it benefited from higher calling rates and a more stable Kenyan shilling.

Net income surged to 7.77 billion shillings ($91 million) in the six months through September from 4.01 billion shillings a year earlier, Chief Financial Officer John Tombleson told reporters today in the capital, Nairobi. The company raised its guidance for full-year earnings, saying revenue would show “low double-digit growth.”

“They are on track to meet our full-year estimate of 38 percent profit growth,” Eric Musau, a research analyst at Standard Investment Bank, said in an interview at the briefing.

Safaricom raised call charges in October 2011 for the first time in 11 years amid a weakening currency and accelerating inflation in East Africa’s biggest economy. The increase came after a price war with competitors including Bharti Airtel Ltd. (BHARTI)’s Kenyan unit, known as Airtel Networks Kenya Ltd., that resulted in profit plunging 47 percent in the six months through September 2011.

“The price war that affected us in 2011 is what hit our profit last year,” Chief Executive Officer Bob Collymore told reporters today. “We have now recovered from that.”

Safaricom, which is 40 percent-owned by Vodafone Plc (VOD), the world’s biggest mobile-phone operator, said revenue in the first half grew 19 percent to 59 billion shillings as the number of customers increased by 7 percent to 19.2 million.

Voice, Data

Voice revenue climbed 19 percent to 37.4 billion shillings, while data sales climbed 29 percent to 3.98 billion shillings. Income from MPESA, the company’s mobile money-transfer service, surged 32 percent to 10.4 billion shillings as the number of customers grew 2.4 percent to 15.2 million, the company said.

Capital expenditure in the fiscal year through March will be 23 billion shillings, with 95 percent of it going to network improvement, Tombleson said.

Over the next five years, Safaricom will spend 2 billion shillings annually on a fiber-optic network that will expand by 500 kilometers (311 miles) each year, Collymore said.

“Fiber will begin to come gradually onto the ground towards the end of the financial year,” he said.

Chairman Nicholas Ng’ang’a said the company also benefited from a lower inflation rate and the shilling’s recovery against the U.S. dollar.

Inflation Slows

Kenya’s currency declined 17 percent against the dollar in the six months through September 2011 as inflation surged to more than three times the government’s target, peaking at almost 20 percent in November 2011.

The shilling has traded little changed this year, gaining 0.3 percent, according to data compiled by Bloomberg. Inflation slowed for an 11th month to 4.1 percent last month.

Shares in Safaricom, Kenya’s second-biggest company by market value, have rallied 51 percent this year, outperforming a 34 percent rise in the Nairobi Securities Exchange All-Share Index. (NSEASI)

Safaricom also competes with Telkom Kenya Ltd., a joint venture between the government and France Telecom SA (FTE), and Essar Telecom Kenya Ltd., a unit of Essar Group of India.

To contact the reporter on this story: Eric Ombok in Nairobi at eombok@bloomberg.net

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net

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