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Safaricom First-Half Profit Surges as Data Share Grows

Safaricom Ltd., Kenya’s biggest company by market value, raised its full-year cashflow forecast by as much as 20 percent as sales from data and mobile money transfers continue to grow faster than revenue from voice.

Free cash flow will probably be 20 billion shillings ($234 million) to 21 billion shillings in the year through March, up from a previous prediction of 17.5 billion shillings, Chief Executive Officer Bob Collymore said at a briefing in Nairobi, the capital. The company also raised its full-year capital expenditure target to as much as 27 billion shillings from 24 billion shillings as it extends fiber-optic cable to connect people to the Internet.

“Free cashflow is the driver of dividends so this should be good news to shareholders,” Collymore said. “Our strong non-voice revenue underpins our strategy to grow our revenues beyond voice.”

Net income climbed 45 percent to 11.3 billion shillings in the six months through September from 7.77 billion shillings a year earlier, the company said in a statement e-mailed by the Nairobi Securities Exchange after the market closed. Safaricom is 40 percent-owned by Newbury, England-based Vodafone Plc. (VOD)

Revenue growth from M-Pesa, the mobile money-transfer service, Internet and text-message services have outpaced sales from voice for at least the past three years, according to the company’s latest annual report. Their share of revenue increased to 35.1 percent in the first half, from 31.6 percent a year earlier, the company said today.

Customer Numbers

Eric Musau, an analyst at Nairobi-based Standard Investment Bank Ltd., forecast earnings would grow 30 percent, while Kuria Kamau, an analyst at Kestrel Capital (East Africa) Ltd., had estimated a 15 percent increase.

Total revenue in the first half grew 17 percent to 69.2 billion shillings as the number of customers increased by 8.3 percent to 20.8 million. Mobile data customer numbers, or those using the Internet on smartphones and other devices, surged by 52 percent to 8.5 million.

“The free cashflow will get everyone excited because it means they are raising the dividend payout,” Aly-Khan Satchu, chief executive officer of Nairobi-based Rich Management Ltd., said in an interview. Safricom’s dividend for fiscal year 2013 was 41 percent higher than the previous year.

Data Sales

Voice revenue climbed 12 percent to 41.9 billion shillings, while data sales grew 37 percent to 5.47 billion shillings. Revenue from M-Pesa advanced 20 percent to 12.5 billion shillings.

Safaricom shares have rallied 91 percent this year, outperforming a 38 percent rise in the FTSE NSE 25-Share Index. They were down 0.5 percent at 9.65 shillings by the 3 p.m. market close in Nairobi, after rising 7.8 percent in previous four days.

Safaricom, East Africa’s biggest mobile-phone operator, competes with Telkom Kenya Ltd., a joint venture between the government and France Telecom SA, Bharti Airtel (BHARTI)’s Kenyan unit 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: Paul Richardson at pmrichardson@bloomberg.net

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