The Treasury has emerged as the biggest beneficiary of Safaricom’s runaway profitability, with initial calculations showing it will walk away with half of the Sh80 billion pre-tax profit that the telecoms operator made.
The telecoms operator is set to pay the Treasury Sh40 billion in taxes and dividends for the financial year ended March 2018, setting a new record in the amount of money a single corporation has contributed to the Exchequer in Kenya.
Safaricom yesterday announced a 14.1 per cent increase in net profit to Sh55.3 billion for the year ended March 31, having grown its total revenue by 9.8 per cent to Sh233.7 billion, a record in corporate Kenya.
Safaricom’s filings show that it has paid Sh24.62 billion in taxes for the financial year in review.
Dividends
The telecoms operator said it intends to pay shareholders a dividend of Sh1.10 a share, up from Sh0.97 the previous financial year, taking the total payout to shareholders this year to Sh44.1 billion from Sh38.9 billion paid out the previous year.
This means that the government, which holds a 35 per cent stake in the company or 14.02 billion shares, will walk away with Sh15.42 billion in dividends.
Safaricom paid the Treasury Sh22.2 billion in taxes and a dividend of Sh13.6 billion the previous year.
South Africa’s telecoms operator Vodacom, which holds a 35 per cent stake in Safaricom, is also waiting for a Sh15.42 billion dividend cheque. The UK’s Vodafone, the parent company, is set to earn Sh2.2 billion from its five per cent stake in Safaricom.
Safaricom rode on its mobile money M-Pesa and mobile data business, which recorded double-digit growth, to increase its revenue despite the slowdown in its voice business.
“M-Pesa and mobile data continued to be the drivers of growth in the year. Contrary to global trends, voice revenues also grew. We also recorded revenue growth in fixed data, a relatively new business, which is already accounting for three per cent of our service revenue,” said Safaricom chief financial officer Sateesh Kamath.
“We continue to invest a significant portion of our capital expenditure (capex) to enhance the data capabilities in the network,” Mr Kamath said, adding that Safaricom built 450 additional 4G sites, 653 3G sites and 250 other sites during the year. Last year, the firm deployed Sh35.3 billion in capex, and Mr Kamath said it plans to invest Sh36.4 billion in the business this year.
M-Pesa, Data revenues
M-Pesa revenues grew 14.2 per cent to Sh62.9 billion while mobile data grew 24 per cent to Sh36.4 billion.
The mobile money service now accounts for 28 per cent of Safaricom’s revenues, up from 20.9 per cent three years ago, while data contributes 16.2 per cent of total revenue, up from 9.5 per cent.
Voice revenue growth continued to slow down, having expanded by a marginal 2.4 per cent to Sh88.9 billion while short text message (SMS) revenue was up 6.2 per cent to Sh17.7 billion.
Voice business’ share of total revenue fell in the past three years from 52 per cent to 39.6 per cent for voice while that of SMS dipped from 10 per cent to 7.9 per cent.
The two business lines have come under direct attack from communication apps like WhatsApp, which have become popular with users due to lower cost, tighter data security and widespread access with increased usage of smartphones.
Safaricom added 1.4 million customers to its subscriber register, taking its total base to 29.6 million. It had 20.5 million active 30-day M-Pesa users.
Analysts see M-Pesa and data as retaining the biggest headroom for growth, given the relatively high number of customers who are yet to actively engage on the platforms.
“In-network opportunities from the two segments still endure from the approximately 30.5 per cent and 40.2 per cent of total customers who are not active M-Pesa and mobile data users respectively. Additionally, more integration of the M-Pesa ecosystem (recently PayPal, Google Playstore) will underpin growth in revenue per user of M-Pesa,” said Genghis Capital in a note on the telcoms operator’s financial results.
Shareholders
The higher revenue has translated into tidy returns for shareholders, who have combined growing dividends with impressive capital gains at the stock market.
In the past one year, the Safaricom share price has gained 44 per cent to stand at Sh29.25, translating into a Sh360.6 billion gain in investor wealth as measured by market capitalisation.
The stock gained 2.7 per cent or 75 cents during yesterday’s trading to close at Sh29 as investors reacted positively to the results.
Most of the gains though are enjoyed by the three large shareholders, who together control 75 per cent of the firm.
Latest shareholder information dated March 2017 shows that the firm had about 582,000 shareholders on its books, two thirds of whom held less than 1,000 shares each.
Treasury gets Sh40bn Safaricom pay cheque