Safaricom PLC has today announced its half-year results ending September 2019. Some of the results segments have been surprising, despite its strong financial performance.

Revenue growth for the half-year to September 2019 was 5.3% driven by robust performance across M-PESA and fixed data and strong customer growth offsetting decline in the traditional revenue streams and soft performance on mobile data.

Safaricom PLC CEO Michael Joseph responds to a question during the Safaricom Half Year results announcement at the Michael Joseph Centre today.
  • Service revenue growth of 5.3% to KShs 124.32bn.
  • Voice service (incoming and outgoing) revenue declined 1.4% to KShs 46.87bn.
  • M-PESA revenue grew by 18.2% to KShs 41.97bn.
  • Mobile data revenue increased by 4.0% to KShs 19.78bn.
  • Messaging revenue declined by 11.0% to KShs 8.60bn.
  • Fixed service revenue increased by 18.4% to KShs 4.55bn.
  • One month active overall customers increased by 8.9% to 27.45mn.
  • One month active M-PESA customers increased by 12.4% to 23.61mn.
  • One month active mobile data customers increased by 14.8% to 20.19mn.

Strong financial performance

  • 12.7% growth in EBIT, or Profit before Interest and Tax, to KShs 49.82bn with an EBIT margin of 38.5%, up 2.4ppts YoY.
  • Net Income, or Profit after Tax, increased by 14.4% to KShs 35.65bn.
  • Free Cash Flow declined 2.8% to KShs 37.33bn.

Voice and Messaging

Voice declined 1.4% while messaging declined 11.0%. This decline was partly driven by competitive pressures and migration to newer technologies, and partly by the impact of corrective actions taken last year to make it easier for our customers to manage their premium rate subscriptions, and opt-out of them were no longer needed. Voice and messaging are now 44.6% of service revenue.

M-PESA

M-PESA has sustained robust growth in the period recording YoY growth of 18.2% despite the impact of the slow-down in the gaming industry. The growth was driven by a 12.4% YoY increase in 30-day active M-PESA customers to 23.61 million and a 7.8% YoY growth in monthly usage per customer to 13 chargeable transactions per month. The company added 2.6 million active M-PESA customers with MPESA now accounting for 33.8% of service revenue, further accelerating the displacement of traditional voice and messaging services. Excluding gaming, revenue grew 20.9% YoY and chargeable transactions per customer per month grew 17.5%.

Mobile Data

Mobile data registered a 4.0% growth in revenue as we continue to carry the effect of corrective actions taken in the prior year; repositioning data bundles and absorbing the excise duty increase. Mobile data now accounts for 15.9% of service revenue and registered an impressive 14.6% growth on the revenue earned in the second half of last year. Growth in mobile data revenue is expected to return to double digits in the second half of this year driven by increased penetration and usage.

Fixed Data

In the period, fixed service revenue registered a growth of 18.4% and contributes 3.7% of total service revenue in the period.

Michael Joseph, Safaricom PLC Interim CEO commented:

Our top priority for the first half of this year continues to be our customers, specifically regaining their trust and in the process growing our market share. I am pleased to advise that we have witnessed improved customer sentiments through measures such as NPS and brand consideration and a market share increase for the first time since 2017.

We have always believed that investment in our network and infrastructure is a key to success, and continue to invest ahead of the curve. In the first half of this year, we accelerated our 4G rollout as promised, adding an additional 732 sites in the period, a growth of 50% year on year and reaching 63% coverage as we strive to cover every town in Kenya by the end of the year.

We also continue to accelerate our digital transformation and agile agenda. We believe our continued focus on digital engagement with customers will enable us to enhance and simplify our customer service offerings.

Looking ahead, the innovation pipeline looks promising. We will sustain the momentum of investing in the quality of our service and growth in our portfolio including deeper penetration of M-PESA into the economy, cloud and IoT solutions, our agricultural and e-commerce platforms, regional expansion and new business opportunities.

We remain committed to our purpose of transforming lives, integrating the Sustainable Development goals into everything we do. We continue to support maternal and educational projects and economic empowerment for the youth.

As I announced last week, we are making a commitment to be Simple, Transparent and Honest in everything we do as demonstrated by the launch of our simplified plans and customer journey. This is a total transformation of how we do business, and while there may be some impact in the short-term, we believe it is the right thing to do to ensure the long-term sustainability of this company. We hope you are as excited as we are and look forward to welcoming some of you back to the Safaricom family.

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