Safaricom Plc has announced an impressive 11% increase in its profits, surpassing market expectations.
This growth is primarily driven by strong performance in its Kenyan operations, despite challenges faced in its Ethiopian market due to currency depreciation.
The company is optimistic about future growth as it continues to expand its customer base in Ethiopia.
Key Takeaways
- Safaricom’s profit rose by 11%, reaching Sh47.4 billion in the latest financial report.
- The Kenyan unit’s revenue growth was bolstered by M-Pesa, voice, SMS, and data services.
- The Ethiopian market, while currently facing losses, is expected to narrow its losses significantly in the coming year.
Strong Performance in Kenya
Safaricom’s Kenyan operations have shown remarkable resilience, with profits increasing by 14.1% to Sh47.4 billion. This growth can be attributed to several factors:
- M-Pesa Revenue: Revenues from M-Pesa, the mobile money service, surged to Sh77.2 billion, up from Sh66.2 billion a year earlier.
- Mobile Data Growth: Mobile data revenue increased by 20.2% to Sh35.5 billion.
- Voice and Messaging: Voice revenue grew by 4.8% to Sh40.5 billion, while messaging revenue rose by 8.0% to Sh6.2 billion.
The overall service revenue for the group reached Sh181.4 billion, marking a 14% increase compared to the previous year.
Challenges in Ethiopia
Despite the positive results from Kenya, Safaricom’s Ethiopian operations have faced significant challenges. The depreciation of the Ethiopian birr has impacted the company’s financial performance:
- Losses in Ethiopia: The Ethiopian unit reported a loss of Sh19.3 billion, a significant increase from the Sh7.4 billion loss recorded a year earlier.
- Currency Depreciation: The birr depreciated by 51.5% between March and September, inflating debt servicing costs and local expenses.
- Future Outlook: Safaricom anticipates that the Ethiopian business will take longer to break even, now projected for the 2027 financial year due to ongoing foreign exchange reforms.
Future Growth Prospects
Looking ahead, Safaricom remains optimistic about its growth trajectory, particularly in Ethiopia. The company has outlined several strategies to enhance its performance:
- Customer Acquisition: Safaricom aims to expand its customer base in Ethiopia, which currently stands at 4.6 million subscribers.
- Revenue Growth: The company expects to narrow its losses in Ethiopia significantly, projecting a reduction to as low as Sh23 billion in the next financial year.
- Market Adaptation: Safaricom is adapting its pricing strategies in response to market conditions, including adjusting prices to recoup losses from currency fluctuations.
Conclusion
Safaricom’s latest financial results highlight the company’s strong performance in Kenya, which has helped offset challenges in Ethiopia.
With a focus on customer growth and strategic adaptations, Safaricom is well-positioned to navigate the complexities of the Ethiopian market while continuing to thrive in its home market of Kenya.
