Safaricom of Kenya Full-Year Profit Jumps 39% on Data Income

Safaricom Ltd., which rivals East African Breweries Ltd. as Kenya’s largest company by market value, said full-year profit surged 39 percent as revenue from data services increased.

Net income jumped to 17.5 billion shillings ($209 million) in the 12 months through March from 12.6 billion shillings a year earlier, Chief Financial Officer John Tombleson told reporters today in Nairobi, Kenya’s capital. The median estimate of eight analysts surveyed by Bloomberg was 17.2 billion shillings. Sales grew 16 percent to 124.3 billion shillings, helped by a 29 percent increase in non-voice revenue.

Mobile-phone companies are looking to data services such as mobile Internet for revenue growth as voice markets mature. Operators including Safaricom, 40 percent owned by Vodafone Group Plc (VOD), are also offering African customers banking through their mobile phones to help many of them gain access to financial services for the first time.

Growth in non-voice revenue is “underpinning our strategy to diversify our revenue channels,” Chief Executive Officer Bob Collymore said at a presentation in Nairobi.

The company will pay a dividend of 0.31 shillings per share, a 41 percent increase on last year. Safaricom shares gained 3.6 percent at 7.15 shillings at 12:56 p.m. in Nairobi, increasing this year’s gains to 42 percent.

Beating Expectations

“The dividend was higher than we initially expected,” Eric Musau, a research analyst at Nairobi-based Standard Investment Bank Ltd., said in an interview. “The earnings are broadly in line with estimates.”

Free cash flow, which measures a company’s performance by considering the cash available for distribution to security holders and to settle its short-term debts, grew 55 percent to 14.5 billion shillings, Collymore said. It will be in the range of 15.5 billion shillings to 17.5 billion shillings in the year to March 2014, he said.

“Based on the dividends that we are paying and what we forecast our free cash flow to be for the next year, it is a fairly reasonable assumption that we will see zero debt in a year’s time,” Tombleson said. Capital expenditure will be little changed at 24 billion shillings, he said.

M-Pesa, the company’s mobile money-transfer service, grew revenue by 30 percent to 21.8 billion shillings, with the number of registered customers totaling 17.1 million. Average revenue per user for the service grew 22 percent to 117.4 shillings.

Upgrade System

Safaricom will upgrade the M-Pesa system to handle more than 600 transactions per second from 250 now, Collymore said.

The company will also spend more than 10 billion shillings over the next five years to build 2,500 kilometers (1,500 miles) of fiber-optic links in Nairobi, Collymore said. The first 500 kilometers will be completed this year.

“We will use it for back hauling to the base stations but also getting to customer premises,” Collymore said.

M-Shwari, a mobile phone-based bank started in November by Safaricom in partnership with Nairobi-based Commercial Bank of Africa, has about 1.2 million active customers, Collymore said. The service has moved 880 million shillings in deposits and 390 million shillings in outstanding loans.

“People should not look at M-Shwari being a fantastic revenue generator in the early years” Collymore said. “It is revenue generating but it is not a big deal.”

Safaricom increased its customer base by 1.8 percent in the year to 19.4 million. Voice revenue climbed 5.7 percent to 336.6 shillings.

Competitors of Safaricom include units of France Telecom SA (FTE) and India’s Bharti Airtel Ltd. (BHARTI) and Essar Group.

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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