KENYA: Safaricom issues half-year financial report showing 2.2 percent rise after expansion drive

Record ID: 361098

  • Title: KENYA: Safaricom issues half-year financial report showing 2.2 percent rise after expansion drive
  • Date: 13th November 2008
  • Summary: (AD1) NAIROBI, KENYA (NOVEMBER 12, 2008) (REUTERS) SAFARICOM CEO MICHAEL JOSEPH MAKING PRESENTATION ON SAFARICOM FIGURES AUDIENCE PROJECTION SCREEN DISPLAYING SAFARICOM ANNUAL RESULTS (SOUNDBITE) (English) MICHAEL JOSEPH, SAFARICOM CEO, SAYING: "We will continue to build on our strengths in the second half of this year and I expect that, once again at the end of the finan
  • Embargoed: 28th November 2008 12:00
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  • Location: Kenya
  • Country: Kenya
  • Topics: Finance
  • Reuters ID: LVAUE2O9MWH84MEVTN9PL327ZMO
  • Story Text: Subscribers in Kenya's biggest mobile phone operator, Safaricom, rose 50 percent in the first half of the year as the company invested heavily in network coverage and acquiring new users.
    Pre-tax profits, however, grew marginally by 2.2 percent to 8.976 billion shillings (117.5 million U.S. dollars) as east Africa's biggest firm by market capitalisation lowered tariffs in the face of competition and as it acquired lower-spending consumers.
    Chief Executive Michael Joseph told a news conference the company would continue investing to increase its customer base and take advantage of opportunities in data services to offset falling average revenues per user (ARPU) in the voice segment.

    "We will continue to build on our strengths in the second half of this year and I expect that, once again at the end of the financial year, we will produce a good set of results," he said.

    "We have a huge customer base. Customers who are actually on our network, who are actually using our network and spending money on our network.
    So if you compare us to anyone else, we have a massive advantage in terms of the amount of customers," Joseph added.
    Although revenue increased by 20.4 percent to 34.5 billion, ARPU fell to 503 shillings from 665 shillings. A consortium led by Britain's Vodafone holds 40 percent of Safaricom.
    Safaricom said the lower ARPU was expected because it acquired more consumers with lower spending power, especially in rural areas, and it was forced to reduce tariffs as competition entered the market.
    At 0800 GMT, the stock traded at 3.70 Kenya shillings from 4.30 at the close on Tuesday -- a 14 percent a drop.

    "We are disappointed in the share price. I mean all of us in the management team, in my company, are investors and shareholders. We would like to see it go up, but I think its factors beyond our control," Joseph said, also referring to the disappointing performance of Safaricom shares ever since their debut on the Nairobi Stock Exchange (NSE) earlier in the year.
    Safaricom said it had spent 10 billion shillings in capital expenditure to expand its network and get new subscribers, which it said helped raise its market share to 81 percent.
    Joseph also added that the company is prepared to deal with the effects of the global financial crisis.

    "I think the world economic situation will impact us. Maybe not immediately, but it is beginning to see the impact now with inflation, perhaps less investments coming in, maybe a change in interest rates, but I think we need to be prepared for that. That the economic situation around the world may not turn around or will not turn around over the next six months and we need to be prepared for that," he said.
    In the period under review, Safaricom has seen competition ratchet up from rival Zain, which has cut calling rates sharply to attract and retain subscribers.
    Telkom Kenya, controlled by France Telecom also launched a new mobile phone service called Orange in September and a fourth player, Econet Wireless, is expected to start operations this month.
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