Safaricom to Boost Investment in Kenyan 4G Network Rollout

Safaricom Ltd., Kenya’s largest company by market value, will boost investment this fiscal year, if it’s allocated spectrum by the government to roll out a mobile LTE, or fourth-generation, network.

“It will be a safe bet to assume we will spend the same amount next year as this year,” Chief Financial Officer John Tombleson said yesterday in an interview in Nairobi. “If we get spectrum for LTE, there will be an overlay on top of the business-as-usual capex.”

In the 12 months ended March 2014, Safaricom’s capital expenditure was 27.8 billion shillings ($319 million), boosting total investment since its inception in 2000 to 243 billion shillings, according to Tombleson. Sales grew 16 percent to 144.7 billion shillings, helped by a 28 percent increase in non-voice revenue.

Wireless carriers across Africa have been spending on Internet-enabled services as customers increasingly turn to smartphones and tablet computers for communication and mobile banking. Competitors include units of Orange SA (ORA) and India’s Bharti Airtel Ltd. (BHARTI)

“If we are over-achieving on trading results, you can spend a little bit more capex, or if you are under-achieving on trading results, you can spend a little less capex,” Tombleson said.

Fiber Network

If the company doesn’t roll out LTE, also known as 4G, most investment will go to infrastructure for M-pesa, the operator’s mobile-money service, boosting Internet capacity in 2G and 3G networks, expanding a fiber-optic network and refurbishing outlets and opening new retail stores, he said.

“We are now ready to roll out LTE, subject to availability of spectrum,” the company said in a statement yesterday. “This will extend the reach of data and the Internet, including the provision of WiFi access to schools.”

Safaricom had a target of enrolling 100,000 merchants by end of March to accept payment from shoppers through mobile-money transfer under a service known as Lipa Na M-pesa, a Swahili phrase that means pay via M-pesa, Chief Executive Officer Bob Collymore said. The company signed up 122,000 Lipa Na M-pesa agents and about 24,000 of them are active, he said.

“Now that we have recruited them we need to make them active,” Collymore said. “We’ve got a team out there who are helping them understand the product better and if we can persuade 120,000 merchants to start taking Lipa Na M-pesa that will be a big game shifter for us.”

Currently about 98 percent of transactions in Kenya are cash-based, he said.

Safaricom shares slipped 0.4 percent to 12.85 shillings by 12 p.m. in Nairobi, paring this year’s increase to 18 percent.

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

To contact the editors responsible for this story: Shaji Mathew at shajimathew@bloomberg.net Kim McLaughlin, Robert Valpuesta

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