The Safaricom Split

There has of late been a clamor to split the Safaricom business. We take you a bit down memory lane first on how M-Pesa first got started.

The launch of M-Pesa in 2007 was a game changer as Kenyans could send and receive money from their mobile phones with ease compared to traditional methods. Within two years, M-Pesa had over 5M customers with approximately 10K daily new registrations with cumulative Person to Person transfers of KES 153.38B, accounting for 3.5% of the country’s Gross Domestic Product. Airtel Kenya introduced Airtel Money in 2011, and Telkom Kenya’s T-Kash entered the market in March 2018. These services have not given serious competition to M-Pesa. 

However, what is striking is the aggregate use of these platforms by businesses. The latest Sectoral Statistics by the Communications Authority of Kenya (CA) show that in FY 2021/22, the total value of business-to-business (B2B) mobile money transfers reached KES 8.82T. This number was KES 994.6B 2 years ago. With regards to Non-Funded Income (NFI) of the banking industry, a linear regression model that takes the total NFI of the largest 9 listed banks as the dependent variable and B2B deposits as the independent variable shows that 79.33% of the variation in NFI can be attributed to B2B Mobile Money deposits.

Since the CA only regulates telecommunications operations, the pain point is the oversight of financial intermediation functions given the volumes transacted hence the growing clamor to split these firms. Last week, in response to a question regarding this directed at the Central Bank of Kenya Governor during the induction of Members of the 13th National Assembly, he hinted at ongoing works whose outcome would be visible from January 2023.

Back in July, Airtel Kenya in July spun its Mobile Money operations to Airtel Money Kenya Limited. Telkom is yet to split its mobile money unit and has cited approval delays from CA. The aftermath of these splits will likely be a strong, standalone mobile money industry under a better view of regulatory agencies. We will be keeping an eye on how the authorities steer the process and how that upends the status quo.

NMG Reports

Nation Media Group earnings and public debt markets in April

👋 Welcome to The Mwango Weekly by Mwango Capital, a newsletter that brings you a succinct summary of key capital markets and business news items from East Africa.
This week, we cover Nation Media Group earnings and public debt markets in April. 

NMG Resumes Dividends

Top-Line Growth: Nation Media Group’s revenues grew 12% in FY21 to reach KES 7.6B. While the revenues are below the 2019 revenues by KES 1.3B, this is the first time since 2013 that the company experienced a jump in revenues. Other notable takeaways:

  • Television advertising revenue was up 25%.
  • 42% annual growth in radio revenue
  • Digital revenue was up 20%
  • E-paper subscriptions edged up 8%

Going Digital: Print circulation declined by 9% decline with e-paper uptake of niche newspapers Business Daily and The EastAfrican growing 5% and 4% respectively.

Profitability: Gross profit grew by 13%, pushing profit before tax up 5X to KES 730.7M. The firm netted KES 493.1M [2020: KES 47M].

Dividends Resume: Earnings Per Share came in at KES 2.5 [2020: KES 0.2]. The Board of Directors recommended a dividend payment of KES 1.5 [2020: 0] translating to a 60% dividend payout ratio.

Buyback Programme: NMG saw an 82.5% uptake of its share repurchase scheme carried out between June and September 2021. The firm was in the market to buy back 20.71M of its shares (10% of issued shares) at KES 25/share.

Big Tech Lands in Nairobi

The Low-Down: In the last two weeks, global tech behemoths Amazon and Google opened centers in Nairobi – an illustration of Kenya’s technological depth and a vote of confidence in Kenyan human capital. This is coming on the back of Microsoft’s recent launch of its KES 3B African Development Centre geared towards scaling tech innovation on the continent.

Scope: Amazon is launching an AWS Local Zone in Kenya, a move that will see the tech giant set up cloud infrastructure in the country – and with it comes low latency performance and edge computing – a development set to benefit a wide array of end-users irrespective of their scale. Google is, on the other hand, opening a Product Development Centre where it will hire 100 tech talent. The centre is Google’s second R&D centre in the continent after the Ghana AI Research Centre. [Mwango Capital]

Implications: The talent war is set to propagate even further as heavyweights outbid other players with competitive packages and benefits – all to the chagrin of local tech startups and corporates. However, this is good overall for the industry as the competition attracts more players not to mention the attendant quality benefits that will accrue to the tech industry. Whichever way you choose to cut this through, this is a net win-win for the local tech industry as the pool of opportunities, quality of talent, and foreign tech investment increases.

Public Debt Markets in April

Scoop: The CBK, on behalf of the National Treasury, has this April raised KES 60B from two bond sales that had a cumulative offer of KES 70B through a three-year and a reopened fifteen-year security. These registered performance rates of 85.11% and 108.49% respectively with interest rates for accepted bids coming in at 11.76% and 13.942%.

T-bills: At the top end of interest rates in the short-term public debt markets in April were rates from 364-day instruments which ranged between 9.743% and 9.755%. The CBK has been on an offensive – lengthening the maturity of public debt which has seen the composition of public debt tilt towards long-term Treasury bonds.

Investing Perspective: The highest interest rates in April government borrowing were in the bonds given all T-bill sales had sub-10% interest rates – reflecting the duration-return trade-offs an investor has to consider when investing in government securities. Investors who want to get exposure to these bonds can always do so through secondary market trading. 

What Else Happened This Week?

🪦 RIP Kibaki: Kenya’s third President passed away on Friday. President Mwai Kibaki will be remembered for his contributions to the country’s financial markets and economic governance. He will be laid to rest on Friday, April 29 in Nyeri County. [State House]

🪖 Regional Military Force: The deliberations of a meeting involving DRC, Kenya, Uganda, Burundi, and Rwanda included forming a regional military force whose first deployment would be to the DRC to combat armed groups in Eastern Congo. [Bloomberg]

📱 Safaricom-Ethio Tower Sharing Deal: In Addis Ababa, the government has reached a pact that will see Safaricom Ethiopia share Ethio Telecoms towers. After the data center and networking installations earlier this year, Safaricom Ethiopia Ops are gaining traction. [Business Daily]

💰 Government’s Dividend Windfall: The government earnings from dividends and profits in 255 SOEs it fully or partially owns fell 37% YoY to KES 45B. Through its 35% shareholding in Safaricom, the government last year raked in KES 19.1B in dividends from Safaricom’s KES 54.89B payout. [The Standard]

💸 Resolution under receivership: Following the collapse and subsequent placement under receivership of Resolution Insurance, the Policyholders Compensation Fund has outlined a compensation structure for the insurer’s policyholders. [Mwango Capital]

🛞 Sameer 2021 FY Results: Revenues were down 14% to KES 651.6M while the cost of sales reduced by 69%. This translated to a 102% growth in gross profit to KES 491.1M and a 344% growth in profit before tax to KES 318.5M. Earnings Per Share were up 386% to KES 0.78. The firm will not be paying dividends for FY 2021. [Mwango Capital]

Interest Rate Watch

Botswana: In Gaborone, the Bank of Botswana’s Monetary Policy Committee is expected to deliver its interest rate decision in the coming week on April 28. [Bank of Botswana]

Charts of the Week

Banks’ Earnings

👋 Welcome to the Baobab Weekly by Mwango Capital, a newsletter that brings you a succinct summary of key capital markets and business news items from East Africa.
This week,we cover Kenyan banks’ 2021 earnings and the Kenyan corporate bond market.

First off, our weekly business news in memes brought to you by M-Tiba:

StanChart’s 81% DPR

Highlights: Total operating income grew 6.4% to KES 29M – translating to a 70.3% jump in profit before tax. The jump in PBT was as a result of a 46% reduction in loan loss provisioning, a uniform theme across FY 2021 banking results in what is a confirmation of banks moving from the pandemic.

Return to Dividends: StanChart paid out a dividend of KES 19 per share against KES 23.49 earning per share, translating to an 81% dividend payout ratio. This is the highest payout ratio among the listed banks that have released their earnings so far.

Absa Pays Dividend

Overview: The loan book grew 12% as loans to customers reached KES 234.3B. Net income jumped 161% to KES 10.9B with KES 5.9B of this to paid as dividends. This translates to a DPS of KES 1.10 [2020: KES 0]. Provisioning for loan losses reduced 48% with the loan to deposit ratio at 87%.

KCB Wary of Asset Quality

Milestones: KCB Group crossed the KES 100B revenue mark by registering KES 108B in total operating income – a 13.5% increase from 2020. This translated to a 74% growth in net income as the bank reduced provisioning by 52%. Further, it surpassed the KES 1T asset-base mark to register KES 1.1T in assets, a 15.3% growth.

Foreign Market Plays: KCB completed the acquisition of BPR [Banque Populaire du Rwanda] on 31 July 2021 and is looking to amalgamate it with its Rwandan unit – KCB Bank Rwanda, to form a single banking business. KCB is also mulling entry to DRC by making an acquisition play for an undisclosed bank. Kenya’s largest lender by market cap and asset base Equity Bank has a presence in DRC through its 2020 acquisition of a majority stake in BCDC to form Equity BCDC. 

Asset Quality: KCB’s stock of gross non-performing loans grew by 27% in 2021 to reach KES 122.8B [18% of the loan book], the highest among listed banks that have reported their results so far. The stock of NPLs has doubled from 2019 as the pandemic roiled construction, hospitality. and manufacturing sectors of the economy rendering loans to those sectors non-performing. These are among the sectors in which KCB has heavy exposure.

Lackluster Dividend: While KCB will pay the highest amount in total dividends [KES 9.6B], the payout ratio [28.2%] is the least among banks that released their results this week.

“Given what is going on in the world today, geopolitical issues, Covid, elections coming up this year, and a big growth agenda both organically and inorganically; we felt KES 3 in total payout per share was a good balance to give returns to the shareholders while at the same time protecting ourselves and giving ourselves that sound springboard to fund our growth.”

KCB CFO Lawrence Kimathi

Cooperative’s Strong Dividend Record

Highlight: PAT came in 54.8% higher than in 2020 on the back of a 9% growth in total operating income. While the DPS has remained flat from last year’s KES 1.00, the payout ratio has reduced to 35% compared to the 50% in 2020.

Cash Preservation: Given that the bank was among those that issued dividends last year – a period when other industry players preserved cash citing the economic environment – for investors, there was the expectation that this year’s results would even see a higher payout ratio given the net profit margin for both 2020 and 2021 remained constant at 27%. 

Mwango Capital’s Take-Away:

Striking a Balance: For banks, the operating and net income margins for FY 2021 are off the charts given the reduced provisioning and return to normalcy after suppressed growth due to the pandemic. However, it remains to be seen how receding COVID-related risks square off with the impact of upcoming general elections on the operating environment this year.

Non-Funded Income: Growth of non-interest income was muted across banks – a theme partly occasioned by the suspension of mobile to bank transfers as part of financial interventions against the Covid pandemic. Last week, Equity Bank asked the regulator to reinstate bank charges on bank to mobile transfers. Reinstatement of the fees will have an impact on banks’ non-funded income given the extent of bank-to-mobile transfers in Kenya.

Risk-Based Lending: After Equity Bank got approval to price credit to customers according to their risk levels, KCB CEO said that the bank could get approval this coming week. As Tier 1 banks get risk-based lending approval, there will be a shift in loan book composition and growth as banks price in all borrowers according to their risk levels. We will keep an eye on the impact of risk-based lending on private sector credit growth.

More Results in the Coming Week

Equity Bank and DTB are expected to release their results on Tuesday and Thursday respectively.

Kenya Corporate Bond Market

KMRC Lists its Corporate Bond: Kenya Mortgage Refinance company on Monday listed its bond at the NSE, effectively commencing trading in the secondary market. The instrument being the first corporate issuance for 2022. The Medium Term Note is the first of three tranches and was oversubscribed by 400% on issuance in the primary market.

“This is a major milestone not only for the Company but for the Exchange as well, given its unique structure and the target sector it will support. It is also the first issuance for the year 2022.”

NSE Chairman Mr. Kiprono Kittony

KCB in Plans to Float Green Instrument: In an earnings call interview with Julians Amboko, KCB CFO noted that there are plans to make an entry to the corporate market by floating a green bond.

“We have been looking at a green bond locally. We are still at very formative stages of that conversation, speaking to advisers just to understand what would be the market appetite, at what rate the market will expect a green bond from an entity like ours to pitch at, and then we take the decision. It is something we are looking at. If we go to the market, it will not be anything below $100M. That would be the bare minimum.”

KCB CFO Lawrence Kimathi

Impact: A successful green bond launch by KCB will contribute to what is a recovering trend in the corporate bond market. It will also highlight climate sustainability as a theme in the industry as the bank is set to invest the proceeds in sustainable investments.

Rejuvenating Market?: KMRC’s bond is the fifth corporate instrument to be issued over the last two years. Other companies that have issued corporate bonds include Acorn, Centum, Family Bank, and EABL. With the performance of these corporate bonds in the recent past in the primary market, all indications point to investors yearning for such-like instruments and investment opportunities.

What Else Happened This Week?

🇰🇪 World Bank’s $750M Loan: The Bretton Woods institution this week approved a $750M Development Policy Operation package for fiscal support and enhancing Kenya’s economic recovery from the COVID-19 pandemic [World Bank].

💰 M-Pesa Spin-Off?: In a submission to lawmakers, the CBK Governor Dr. Patrick Njoroge noted that the move would help ring-fence the mobile money business from operations of the wider telecoms business. This comes barely a week after MTN Group announced it will spin off its Mobile Money business (MoMo) into a fully-fledged independent African fintech unit.

🧯Carbacid-BOC Deal Halted: Carbacid noted that objections filed at the Capital Markets Tribunal and High Court by two BOCK Shareholders are standing in the way of its take-over bid of 100% ordinary shares of BOC Gases [Mwango Capital].

🤝 KRA-Keroche Pact: The two parties entered into a tax payment plan that will see the brewer pay an undisputed tax amount of KES 957M over 24 months starting January 2022 [Business Daily].

⛽ Fuel Prices Up: EPRA reviewed fuel retail prices with super petrol and diesel going up by KES 5 and kerosene prices remaining unchanged [EPRA].

🏦 CBK Tap Sale: CBK reopened three bonds seeking a cumulative KES 31.5B. Total bids received came in at KES 24.8B and with CBK accepting KES 23.8B at rates ranging between 11.997% and 13.973% [CBK].

🇪🇹 Ethio Telecoms Partial Privatization Halted: In an announcement on Friday, Ethiopia’s Ministry of Finance said it had halted the 40% stake sale in the telecoms firm and postponed the process to an unspecified timeline citing a fluid macro-economic situation locally and globally [Ministry of Finance – Ethiopia].

To Crypto or Not To Crypto?

👋 Welcome to the Baobab Weekly by Mwango Capital, a newsletter that brings you a succinct summary of key capital markets and business news items from East Africa.
This week, we cover the new discussion paper by the CBK on crypto, the new CEO at WPPScanGroup and debt issues in Kenya. 

Our newsletter this week is brought to you by:

Mwango Capital. Mwango Capital provides A+ quality analysis and research on the East African capital markets. Follow us on Twitter, join us on Telegram, check out our website. To sponsor our weekly newsletter, memes, or Twitter Spaces, reach us at

To Crypto or Not To Crypto?

Big step: The Central Bank of Kenya published a discussion paper on Central Bank Digital Currencies (CBDCs). This significant step in seeking public participation in digital currencies has been seen as a sign that there are changing winds at the Central Bank of Kenya given that the governor, Dr. Patrick Njoroge has on several occasions reiterated the bank’s anti-crypto stance. To the bank’s credit, throughout this period there have been reports that various stakeholder meetings and interactions with members of the public and practitioners in the space have been happening.

What are CBDCs? CBDCs are a digital version of cash issued by the central banks. CBDCs broadly cover government-issued digital legal tender but with universal acceptability in mind. In the age of 4IR and blockchain, most CBDCs generally tend to be implementations of common blockchain frameworks to variants of government-issued currency creating stores of values mapped to fiat and similar in practice to stable coins.

Around Africa: Last year the new Tanzanian president, Samia Suluhu urged the Tanzanian Central Bank to look into cryptocurrencies. Backpedalling from a total ban on cryptocurrencies in Nigeria, the Nigerian Central Bank introduced a CBDC dubbed the e-Naira in Oct 2021. This follows initiatives by other central banks around the world including:-

Call for Comments: CBK notes that there are two use cases of CBDCs in Kenya, retail payments and cross-border payments. They are calling for public participation via comments no later than May 20th, 2022 via email or web. Coincidentally, this is the same deadline the Federal Reserve has on the same topic and activity 🤔

CBK’s call for comments

Federal Reserve’s call for comments

M&A in the Kenyan Microfinance Space

Two deals in the space of one month have jolted into life the Microfinance space in Kenya. 

First, the National Treasury exempted digital lender Branch International from Sec 19 of the Microfinance Act for a period of 4 years to end-2025 in its acquisition of Century Microfinance Bank paving the way for a formal announcement from the Central Bank of this acquisition. Branch intends to acquire an 85% stake, for which it had to seek exemption since Sec 19 bars 25%+ individual holding. Century has an asset base of KES 350M while Branch has an asset base of KES 1.1B.  

The move is significant as this is the first time a digital lender seeks to acquire a traditional microfinance institution in Kenya. We reached out to the Co-Founder/CEO Matt Flannery for comment on the acquisition and this is what he had to say: 

Becoming a bank has been our vision from the beginning. That’s why we named it Branch.  We want to offer all citizens the level of service once reserved for the rich. We are rolling out this strategy all over Africa and we hope to complete the transition in several countries this year.  

Later, the CBK announced a 73% acquisition of Key Microfinance by LOLC Mauritius Holdings Limited after a Dec 2021 approval under Sec 19(4) of the Microfinance Act by the National Treasury. Key has a market share of less than 1% and has been in operation for more than a decade.

Last year, Uwezo Microfinance Bank was acquired by Salaam African Bank and Choice Microfinance was acquired by Wakanda Network.

Prudential Financial Completes ICEA Acquisition

Done Deal: Prudential Financial, an American Fortune Global 500 and Fortune 500 company, said that it has completed the acquisition of a minority stake in ICEA Lion through a separately managed fund called  LeapFrog Strategic Africa Investments (LSAI). This is part of the company’s eye to expand its presence in emerging markets and makes it the second such acquisition for the LSAI fund after investing in the Enterprise Group Limited in Ghana in 2017. 

From the company’s latest financial results:  

“Meanwhile, on the emerging markets front, we closed on an investment in ICEA LION Holdings, a highly respected financial services market leader in Kenya with operations in Tanzania and Uganda” – Charles Frederick Lowrey, Chairman, CEO & President of Prudential Financial.

LSAI:  LSAI is a USD 350 Million separate managed fund that was formed as an investment partnership in 2016 between LeapFrog Investments and Prudential Financial. The aim is to invest in high-quality life insurance companies in Africa. Prudential is a global financial services provider through providing products in the insurance and investment management space while LeapFro, which was founded in 2007, invests in exceptional businesses in Africa and Asia. The deal was announced in 2020 and was to see LSAI acquire a 24% shareholding in ICEA LION Holdings subject to various regulatory approvals and other conditions precedent, which seem to have been fulfilled. 

WPP ScanGroup Gets New CEO

New Sheriff in Town: Patricia Ithau was announced as the new WPP Scangroup CEO. Markets welcomed the move as its shares on the NSE edged 3.70% higher in intraday trade on the day of the announcement. This is a sign of fresh times for a company that has had a tough past year.

Rough Patch: WPP Scangroup’s challenges started with the suspension of its CEO and CFO on February 19 2021 for unspecified reasons. The ensuing investigations pushed the firm to postpone the release of its financial results for the year ended December 31 2020 to August 31, 2021. In August 2021, the firm said that nothing substantial was uncovered in the probe. 

FY 2020: The financial results showed an increase in net profit from KES 431.9M in FY 2019 to KES 469.2M in FY 2020 as a result of Scangroup’s disposal of its subsidiary Kantar Africa at KES 2.2B. This helped offset losses and register a 462.9M net profit in what would otherwise be a KES 1.7B loss from continuing operations. No dividends were declared for FY 2020. There was a KES 8 dividend in FY 2019 though. 

Profit Warning: Patricia has her work cut out for her as the company has recently issued a profit warning for the financial year ended 31st December 2021. 

Diversity: Other companies with women CEOs are: Limuru Tea, Eveready, DTB, KenGen, BOC, BK Group, and EABL.

Eveready Results Out

One of three: Eveready, one of three NSE companies – others being Car & General and Sasini – that have their FY ending on September 30; reported results for the year ended 30th September 2021. Eveready is a leading provider of portable power solutions in Kenya, operating in automotive, household, and lighting segments.

Results summary: This is how the company performed:

  • Net sales dropped 32.8% YoY.
  • Loss for the year was reduced by 49%. The company’s loss for FY 2020 was KES 69M, and in FY 2021, the company made a KES 35M loss.
  • Cash flows at the end of the year were reduced by 57% YoY.
  • The company is not paying any dividends this year..

Missed deadlines: The company had missed the CMA reporting deadline of 31 January 2022 due to what the firm called “unavoidable circumstances”. 

History: While sales have reduced 52.8% from 2019 to 2021, losses have reduced 88% which could be a sign of restructuring with a path to profitability. Between 2013 and 2021, the firm has turned a profit twice – in 2013, and in 2017. 

Kenya Among The Fragile Five

Debt-laden: Standard Bank Group issued a report this week that named Kenya among the “fragile five” in terms of debt of 18 countries. These are countries that face debt risks over the next two years. Starting with Kenya, the country faces debt-service costs that make up more than 33% of forex reserves and 43% of tax revenues and has a high concentration of commercial loans (28.8% of total debt in 2020-21).

The other 4: The other countries in the Fragile Five are:  

  • Ghana: Commercial lenders own at least 50% of its debt and the spread of the Ghana-US Treasuries of over 1,000bps shows a country in debt distress. (Interesting how Standard bank says Kenya would be in the same bracket as Ghana save for the IMF program last year)
  • Angola: 77.1% of Angola’s debt is held by commercial lenders. Standard Group points to weak investments in the oil sector and an ending IMF program as key red flags.  
  • Ethiopia: Foreign exchange shortages, the ongoing civil war, and short-term debt service take up significant foreign-exchange reserves.
  • Zambia: The country defaulted on its debt in the pandemic era in 2020 as commercial loans stand at 78.1%. There is a $1.4B IMF facility that came to the rescue which is tied to progress on the country’s debt restructuring under the Common Framework.

Uganda the silver lining: Uganda’s outlook is bright as the economy is set to recover strongly after the lifting of restrictions. It is forecasted to grow 4.5% in 2022 and 6.1% in 2023.

What Else Happened This Week?

🌍 $9B Africa Airlines Losses:: The African Airlines Association, in a report, noted that 2020 and 2021 losses of African airlines hit $10.21B and $8.6B on COVID restrictions. The losses are equivalent to 58.8% and 49.8% of 2019 revenues. [Africa Airlines Performance Update]

As a result of these uncoordinated measures, air passenger traffic from January to December was only 42.3% compared to the same period in 2019.  Capacity reached 52.7%. In January 2022, the capacity is expected to inch up by 6.3% to 59% while air passenger traffic will see a marginal increase of 0.3 from the previous month.

💸 Money Laundering in Tanzania: Proposed amendments on the Money Laundering Act tabled by Finance and Planning Minister Dr. Mwigulu Nchembato in the National Assembly seek to grant bail for people charged with money laundering. They are now inviting members of the public to issue comments on the proposals. In Tanzania, people can stay in jail for four or five years over money laundering as the offense does not have bail. [The East African].

“That is what complaints from most citizens are about. Someone could stay behind bars for four or five years over money laundering charges, adversely impacting his/her dependents. The amendment should also differentiate between theft and money laundering because some citizens have adversely suffered due failure to differentiate the two.”

🟢 Hunter becomes the hunted: Markets regulator CMA got the nod through a Court of Appeal ruling to investigate auditor Ernst & Young over Uchumi books. At the crux of the matter are transactions totaling KES 1.9B. CMA summons to E&Y executives in 2016 to shed light on 2014 and 2015 accounts were not honored. KPMG’s forensic audit for 2010 to 2014 Financial Years showed misleading information in the accounts. 

🍔The global brand of KFC, owned by Yum China Holdings, reported their full-year results and they seem unaffected by the #BoycottKFC. There was no mention of potato shortages or the issue of Kenya.  

🌍 African Markets:

Sentiments were mainly positive on the African equity markets this week. With NSX OI Namibia’s overall Index  edging up 3.9 basis points WoW the highest for the week ended 11th February. Namibia remains the most attractive market for investors returning 14.9% on a USD, Year to Date basis followed closely by Nigeria at 9.2%. The Ugandan Stock Exchange shed 0.9% of total investor value, the highest drop on the continent this week.

East Africa: East African markets were bearish for the week with average performance at -0.1%. Top performer was the Nairobi Bourse registering a 0.6% in investor wealth.

North Africa:  North African markets performance was fairly positive with the exception of the Egyptian markets which ended the week at -0.5% .

South of Africa: South African markets rallied this week registering an average performance of 1.3%. All markets in the South of Africa closed the week in the green with the best performer being Namibia followed closely by South Africa.

West Africa:  BRVM’s Composite Index, a regional stock index serving West African Economic and Monetary Union (WAEMU) countries: Côte d’Ivoire, Mali, Senegal, Togo, Burkina Faso et and Niger returned 2.06% Week on Week the best performer in West Africa. The Average performance WoW for West African markets closed at 0.7% .

📊 Charts of the Week:

Surging Oil Prices: Oil prices are surging [WTI +59%, Brent +54% over the last 1 year] as geopolitical tensions rise and economies try to get past the pandemic. 

COVID-19 Vaccination in Africa: Only 11% of people in Africa have been fully vaccinated, with 5.3% partially vaccinated. 61.7% of the world population has received at least one dose of a COVID-19 vaccine and 10.34B doses have been administered globally. [Our World in Data]

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Safaricom HY 2021/2022 Earnings Call Transcript

Company Participants

  • Chairman Michael Joseph
  • Chief Executive Officer Peter Ndegwa
  • Chief Finance Officer Dilip Pal
  • Chief Corporate Affairs officer Stephen Chege


Show Notes:

  • [00:01:03] – Introduction by Chief Corporate Affairs Officer
  • [00:02:24] – Business resilience, and re-opening of the economy in the face of the Pandemic
  • [00:04:06] – Regulatory space
  • [00:04:42] – Headwinds
  • [00:05:18] – Safaricom & M-Pesa Foundations’ Initiatives in support of the communities
  • [00:06:29] – Board’s commitment to work with management to deliver value to shareholders, transform the lives of customers, employees, business partners, and the community.
  • [00:08:23] – Sustainability
  • [00:09:43] – Strategic focus
  • [00:11:24] – Strategy execution
  • [00:13:48] – Update on the investment in Ethiopia, risks, and opportunities
  • [00:19:19] – HY22 Key Highlights
  • [00:20:40 – Service Revenue
  • [00:22:09]- M-Pesa & Fintech Solutions Growth
  • [00:22:54] – International Money Transfer, and Lendings & savings
  • [00:23:10] – M-Pesa Values and customers
  • [00:24:09] – Innovation in digital financial services
  • [00:24:21] – Customer Supper App & Business Super App
  • [00:25:04] – Mobile data
  • [00:26:29] – Fixed service revenue
  • [00:27:19] – Net Income
  • [00:27:54] – Borrowings & Capex
  • [00:28:43] – Revised FY22 Guidance & outlook


Stephen [00:01:03]: Good morning ladies, and gentlemen. Welcome to Safaricom’s half-year 2021-2022 financial results announcement. On behalf of the Board of Directors, the management team, and staff of Safaricom PLC. We thank you very much for making time to join us virtually for this event. I’m glad that thanks to technology which is the foundation of our business, we can virtually connect and engage this morning. We hope that you’re all keeping safe, masking up, washing your hands, and observing the required precautions to help manage the Covid-19 pandemic. Most importantly, we hope that you have been vaccinated or are planning to get vaccinated in the coming days. 

We’ll start off with remarks by Safaricom PLC Chairman of the Board of Directors, Michael Joseph. Safaricom PLC CEO Peter Ndegwa and Chief Finance Officer Dilip Pal will then take us through the financial performance and results for the period under review. Should you like to keep your social media followers updated on our proceedings this morning, our hashtag today is #SafaricomHYResults. In staying committed to our promise on diversity and inclusion our sign language interpreters this morning are Leonida Kaula and Victor Mwania. It is now my pleasure to invite Safaricom PLC Board Chairman, Michael Joseph to make his remarks.

Chairman’s Remarks

Michael [00:02:24]: Thank you for joining us for the half-year 2022 results announcement. The past 18 months have been as we all know a difficult period for everyone with far-reaching changes and extraordinary circumstances. However, despite the difficult circumstances, the country has found a way through adversity. Kenyans are resilient people who have found a way to cope in difficult economic times despite the challenges of these times. The management and staff have shown similar resilience in adjusting to these challenges as will be seen later in this announcement. 

The Board is encouraged by this resilience especially from a business point of view and the recovery trajectory which we are witnessing by a return to near normalcy. As Peter will share shortly, we’ve noted improved business sentiment with strong service remedy recovery, a strong balance sheet, a diversified portfolio, and improved consumer confidence. Following the President’s recent announcement lifting the nationwide curfew that has been in place since March 2020, it is a noted gradual reopening of the country and hopefully the economy.

As Peter will share shortly, we’ve noted improved business sentiment with strong service remedy recovery, a strong balance sheet, a diversified portfolio, and improved consumer confidence.

However, the vaccination process is slower than expected despite the availability of vaccines throughout the country. For a population of over 40 million Kenya has administered just over four million doses of the Covid-19 vaccine so far. Ladies and gentlemen, a well-vaccinated country is a prerequisite for a fully open economy as we adjust to the new normal. We welcome the government’s efforts to procure more vaccines and we call about Kenyans to get vaccine vaccinated no matter where they may be. Let me now turn to the regulatory space.

Ladies and gentlemen, our regulators have been very supportive of our efforts in supporting our customers navigate through the tough unprecedented period, and for this we are grateful. Through the allocation of extra frequency by the Communications Authority, we were able to meet the increased demand for data by our customers working and learning from home. A conducive regulatory environment is important for the growth of our business and the sector at large especially considering the rapidly evolving technologies and needs of our customers and society.

Through the allocation of extra frequency by the Communications Authority, we were able to meet the increased demand for data by our customers working and learning from home.

However, there were some headwinds on the other hand.  We saw an increase in excise duty on telco products from 15 to 20% that took effect from July 1, 2021, which contributed towards an increased pressure on the consumer wallet in a period witnessed by reduced income and rising inflation. The Board is aware of the upcoming general election period which is usually characterized by depressed economic activity and reduced investments as businesses and investors adopt a more cautious approach due to the associated political risk.

Ladies and gentlemen, I will now speak about Safaricom’s efforts and the Board’s commitment to supporting Kenyans through various initiatives. I am proud of the work that the CEO and his team have done in ensuring the well-being of our staff customers, and other stakeholders. Through Safaricom and M-Pesa Foundations we stood with our communities investing over Kshs 810 Million through different programs in the first six months of this financial year. 

Through Safaricom and M-Pesa Foundations we stood with our communities investing over Kshs 810 Million through different programs in the first six months of this financial year. 

These projects include amongst others a staff program dubbed Pamoja initiative, Ndoto Zetu, Maternal & Healthcare program called Uzazi Salama and these have benefited over 2 Million Kenyans. During this period, we also sponsored various sports events across the country which included the 2020 Tokyo Olympics, The World Rally Championship, The World Athletics under 20 Championships as well as the Magical Kenya Open Golf Tournament. Beyond sports, through the Lewa Marathon, we raised significant funding for wildlife conservation and community development. And we also continue to support the Safaricom Youth Orchestra amongst other projects.

In conclusion, ladies and gentlemen, The Board will continue to work with management to deliver value to our shareholders. Most importantly, we’ll work to ensure that Safaricom continues to transform the lives of our customers, employees, business partners, and communities in Kenya and beyond. We fully support Peter and his team as he executes the business strategy to become a digital-first and insights-led organization unlocking our next phase of growth whilst delivering a sound return to our investors including our new investment in Ethiopia. 

The Board would like to extend its deep appreciation to the CEO, the management, and all members of staff for the efforts and commitments during a very challenging year. Looking into the future we firmly believe that our business is well cushioned to support our customers to rebound stronger and to build back better. With those remarks, I now take this opportunity to invite our Chief Executive Officer, Mr. Peter Ndegwa to share the highlights of our business for the period under review. Thank you very much.

CEO’s Remarks

Peter [00:07:31]: Fellow shareholders, representatives of the investor community, The Board, management and staff of Safaricom PLC, members of the media and the online community, good morning. Thank you for joining us for the half-year financial results announcement. As Michael has mentioned, Covid-19 Pandemic altered the environment for all businesses and ours was no exception. In responding to the Pandemic we’ve remained true to our purpose of transforming lives, a guiding light in our effort towards supporting and helping the country. 

These efforts are paying off in building resilient individuals, resilient communities, and businesses especially now as we gradually begin to experience near-normalcy. To start us off, let me take you through how we have built a sustainable business, standing together to grow value across the ecosystem, what we call “Standing Together and Going Beyond”. During this period, we reiterated our commitment to continue connecting people to people, connecting people to knowledge, and people to opportunities. 

During this reporting period, we also celebrated 10 years of the sustainability journey. Our 10th Sustainable Business Report showcases how we leverage technology to build sustainable products and services in line with the sustainable development goal. The Pandemic has made a strong case for ensuring a resilient sustainable and more responsible business model. We remain committed to supporting our stakeholders navigate through this period, sustaining over a million jobs in the last financial year. 

The Pandemic has made a strong case for ensuring a resilient sustainable and more responsible business model. 

In our sustainability agenda, we remain focused on our impact on climate agenda and building an inclusive business that meets the needs of our customers but also reflects the diverse nature of our society. Let me now recap on our strategic focus as showcased by strategy house. As you can see at the top of the house we have Transforming Lives, which is our purpose and the guiding light of everything we do. We are now one year into a five-year strategy, which spells out our vision of becoming a purpose-led technology company by 2025. 

In order to bring this vision to life, our mission is to establish a customer-obsessed, digital-first organization by the year-ending financial year 2022. Customer obsession is our main effort towards adding value and delighting our customers with superior experiences more so now as we venture into Ethiopia and expand customer obsession to new geographies. Our enablers in our strategy are aiding the business in deepening customer engagement and experience. For instance, we’ve used our customer value management tools to transform the way we interact with our customers, creating a personalized relationship with our voice data and M-Pesa services. 

Our mission is to establish a customer-obsessed, digital-first organization by the year-ending financial year 2022.

We will continue to use these analytics to gain more valuable insights that will advise our initiatives’ products and services in order to serve our customers better. Our agile transformation journey is also delivering early wins fostering collaboration among staff leading to quicker decision making, increased efficiencies, and faster resolution bringing us closer to our customers. Allow me now to call out our progress so far in our strategy execution as you can see on the screen as we pivot towards a technology company. 

Ladies and gentlemen, our strategy is working. We are happy with the performance of the four transform transformative pillars which are crucial in our strategy execution. We continue to double our efforts to democratize data-driven by access to network with 4G coverage now at 96% smartphone penetration and content aggregation. We are focused on driving access to affordable smartphones to harness the power of technology. This will in turn help build stronger digitally connected and inclusive societies. 

We aim to become a digital-first, insights-led organization that enables platforms and ecosystem partnerships. Our digital channels have helped us to improve our consumer digital experiences and empower our micro and SMEs who are the backbone of the economy. M-Pesa super app had close to four million downloads within the first three months of launch. We’ve also integrated 17 mini-apps and 65 are currently under development with the aim of providing a one-stop solution for our digital consumers.

We aim to become a digital-first, insights-led organization that enables platforms and ecosystem partnerships. Our digital channels have helped us to improve our consumer digital experiences and empower our micro and SMEs who are the backbone of the economy. M-Pesa super app had close to four million downloads within the first three months of launch. We’ve also integrated 17 mini-apps and 65 are currently under development with the aim of providing a one-stop solution for our digital consumers.

Beyond payments we are enabling micro and small businesses with products such as bill manager that provides end-to-end solutions like digital invoicing easing their business operations. A strategic pillar to winning in digital ecosystems focuses on digitizing verticals, scaling Digi-farm into a commercially sustainable manner, partnering with Circle Gas Limited to provide clean energy, using IoT,  which is the internet of things, and our financial services tools, and driving health care inclusion through partnerships. During this period we managed a Kshs 2.3 Billion OPEC savings, thanks to initiatives such as smart procurement and planning helping the business to be more efficient while delivering more value to our customers.

Ladies and gentlemen, I will now give an update on our investment in Ethiopia. As you are all aware Safaricom Telecommunication Ethiopia PLC is now a subsidiary of Safaricom PLC. We are currently in the process of setting up our operations, preparing detailed plans for operational readiness amongst other requirements ahead of our commercial launch in 2022. We are in contact with the relevant authorities in Ethiopia, updating them as per our license obligations. We are confident and looking forward to launching commercial operations as projected whilst cognizant of the current evolving situation in Ethiopia, and as we proceed with our plans adapting and assessing the situation as it evolves.

For now, our priority is the safety and security of the small number of employees that had already joined the organization. We hope for a fast and peaceful resolution to the current situation. We remain committed to taking telecommunication and digital services to the people of Ethiopia. The opportunities are immense as shown in the Simcard penetration rates as well as projected GDP growth rates, as such the task ahead is ambitious and speaks to the country’s focus and determination to nurture innovation and bolster the economy.

Looking at our Ethiopia investment in a bit more detail now. The global partnership for Ethiopia was awarded a unified technology-neutral telecommunication services license. This includes an appropriate spectrum and rights to deploy a world-class network and services that will support our ambition of contributing to Ethiopia’s digital transformation objectives. We are forecasting a CAPEX investment of between USD 1.5B- 2B over the next five years to meet the licensed coverage obligations. Together with our partners, we have availed funding to support this new venture which we anticipate breaking even by year four of operations. 

The global partnership for Ethiopia was awarded a unified technology-neutral telecommunication services license. This includes an appropriate spectrum and rights to deploy a world-class network and services that will support our ambition of contributing to Ethiopia’s digital transformation objectives. We are forecasting a CAPEX investment of between USD 1.5B- 2B over the next five years to meet the licensed coverage obligations.

Ladies and gentlemen, our break-even targets may be significantly impacted by the impact of the current conflict on the launch of operations which we target by mid-2022. Sources of funding for this venture include a mix of debt and partners equity. The projected growth will be enabled by network development through own-build and infrastructure, sharing world-class digital services, and availability of affordable devices in the market. 

Ladies and gentlemen, within the investment there are risks and uncertainties. We are aware of and have mapped out possible risk areas and scenarios ranging from implementation of market liberalization and the new regulatory frameworks, the ongoing political conflict, forex availability amongst others. However, the opportunities outweigh the risks in our view and the uncertainties, largely because the telecom market liberalization has been unquestionably positive and of value for countries across the world. From our experience in Kenya and across the region, we know that the liberalization of Ethiopia’s telecommunication market will be of value in increasing connectivity, creating new digital services and businesses, and generating new jobs for citizens across the country. 

So how are we prepared to launch operations in Ethiopia? In readiness to launch operations, we’ve appointed Anwar Soussa as the Safaricom Ethiopia Telecommunication Managing Director. We’ve also appointed the senior leadership team to lead the establishment of the business and preparation for launch. We’ve launched a recruitment drive to hire a significant number of Ethiopians including a Graduate Management Program where we are committing to hire 150 graduates every year which aims to recruit and train future leaders within the organization.

We are following closely the development in Ethiopia as we gear up for launch as per our license obligations. The team is now preparing for the deployment of network and IT equipment to provide world-class digital services across all regions in Ethiopia. To reiterate, we are committed to taking digital and telecommunication services to Ethiopia, to improve the lives of millions, and are continuing our preparation for commercial launch whilst working remotely. I’ll now welcome our CFO to take us through the results before I come back and conclude and give our revised guidance.

CFO’s Remarks

Dilip [00:18:54]: Thank you, Peter. Hamjambo,mabibi na mabwana. I wish to welcome you all to our FY22 half-year results announcement.  I hope you are all keeping safe and thank you for taking the time to join us this morning. Before I start I would like to remind you that the presentation materials will be available shortly on Safaricom’s website. I will now take you through the numbers in a bit more detail. We have seen solid performance in H1 with service revenue posting 16.9% year-over-year growth. This was supported by strong execution, improved consumer confidence, and business activity in the economy coupled with a return to charging of zero-rated transactions from Q4 of the last financial year.

We have seen solid performance in H1 with service revenue posting 16.9% year-over-year growth. This was supported by strong execution, improved consumer confidence, and business activity in the economy coupled with a return to charging of zero-rated transactions from Q4 of the last financial year.

In the same breadth, EBIT has grown 28.8% year-over-year supported by the recovery of the top line. We’ll unpack this in a little bit more detail in the subsequent slides. I’m happy to note that due to our continued effort to optimize our CAPEX expenditure through our cost leadership pillar, we were able to invest in a capacity upgrade, customer experience while maintaining our CAPEX investment at Kshs. 22.8 Billion in the first half of the year. I’m delighted to also report that our free cash flow has grown 45.8% year-over-year driven by strong performance in operating profit. 

We continue to grow our customer base through great value propositions. Our one-month active customers have grown 4.7% year-over-year to 32Million. Now looking at service revenue in a bit more detail, the chart on the left demonstrates that growth in service revenue was mainly attributed to M-Pesa revenue. We have also seen growth in mobile data, voice, and fixed business. M-Pesa revenue grew 45.8% year-over-year in the period, supported by a return to charging, improved business activity as mentioned earlier. 

Fixed enterprise and FTTH revenue grew 20.1% and 23% year-over-year respectively driven by growth in customers. The graph on the bottom left of the slide illustrates voice performance over the last three halves. In H1 of last financial year, voice was under significant pressure. Through our strong CVM offerings, we were able to yield a much stronger performance enabling us to grow 3.2% year-over-year. Moving across to the right of the slide, you can see our service revenue profile. 

M-Pesa now accounts for 37.8% of our service revenue up from 30.3%  last year after return to charging of previously zero-rated transactions and also economic recovery. The chart on the bottom right shows the continued recovery in service revenue and we are encouraged by the growth as we move into the second half of the financial year. Now to look at the M-Pesa in a bit more detail, growth in revenue was driven by transfers which grew 89.5% year-over-year driven by a return to charging.  

Our fintech solutions continue to be a growth pillar of the M-Pesa ecosystem growing year 43.7% year-over-year. Fintech solutions now account for 32.2% of M-Pesa revenue. Withdrawals have grown 18.8% year-over-year supported by the improved business environment. Now moving over to the graph to the right, you will note that our strategic priority to be a financial services provider is bearing fruit. Growth in fintech solutions is driven by payments contributing to more than 50% of the growth. 

International money transfer continues to perform strongly growing 22.6% year-over-year enabled by the growth in remittances. Lending and savings have grown 17.2% year-over-year driven by Fuliza. Looking at M-Pesa this time from the perspective of values and customers, we are delighted to report that customers have grown 7.1% year-over-year to close at 28.7Million as demonstrated by the graph on the left. Customers transacting behaviors influenced by free fees introduced last year have sustained post return to charging.

Chargeable transactions per customer grew 91.9% year-over-year to 18.1 transactions per customer per month from 9.4 transactions in a similar period last year. Value of M-Pesa transactions continued to grow closing at Kshs 13.7 Trillion up from Kshs. 9 Trillion in a similar period last year. Bank to wallet transactions remain zero-rated and account for 18.1% of HY22 total value of M-Pesa transactions. Innovation in digital financial services has been a key growth driver for M-Pesa. We continue to leverage technological innovation to enhance access to financial services for consumers and enterprise customers.

I’m happy to report that we launched a Consumer Super App in July 2021 and now have 3.9Million downloads and 2Million active customers since launch. We also rolled out the Business Super App and now have 322k organizations currently using the app. In the middle of the slide, you can see the growth opportunities within the M-Pesa fintech ecosystem. We remain committed to meeting the evolving needs of our customers and merchants through innovation to enhance digital financial services. Just to note more details on M-Pesa performance can be found in the results booklet which will be on our website shortly. 

Let me now move on to mobile data. Mobile data revenue grew 6.3% year-over-year weighed down by price rationalization and absorbed tax from increased excise duty from August 2021. There was also a lapping effect of accelerated growth recorded in H1 of last financial year that was largely driven by a shift of working and schooling from home. Looking at the bottom left of the slide usage per customer grew 47.8% year over year to close at 2Gigabytes in the period. This was attributed to CVM initiatives that were aimed at unlocking latent potential in data usage. 

Rate per MB declined 27% year-over-year impacted by price rationalization. Looking at the box on the top right, you can see that whereas overall one-month active customers have grown 4.7% year over year, the one-month active bundle customers grew faster at 8.1% year over year. Similarly, you will also note that active 4G devices and data customers consuming over 1GB grew at a much faster pace of 37.3% year-over-year and 26.67% year over year respectively thus highlighting the opportunity to drive usage.

Ladies and gentlemen, moving on to fixed service, we are delighted with the strong acceleration of our fixed business as a result of growth in customers. FTTH customers grew 17.2% year-over-year while enterprise customers grew 38.3% year-over-year. Looking at the top right side of the slide, you can see that the FTTH closing customers have grown to close at 153,000 up from 119,000 in a similar period last year. And the conversion rate closed at 63.9% up from 53.5 last year. On the bottom right side of the slide are the key fixed enterprise highlights the closing customers have grown to close at 45,000 up from 32,000 last year.

As I had called out earlier EBIT or earnings before interest and taxes recorded a 28.8% year-over-year growth. I’m happy to also report that the EBIT margin grew 3.3 percentage points compared to H1 last year. The business continues to focus on cost leadership as part of our company strategy in the period we are able to achieve Kshs 2.3 Billion of OPEX saving which helped us to mitigate the impact of adverse cost movement in energy and IT-related cost in the period.

Our borrowings closed the period at Kshs. 77 Billion with Kshs. 43 Billion relating to the expansion to Ethiopia and the rest of the borrowing used to fund working capital. Lastly looking at CAPEX we continued with our sustained investment in our network and systems with our capital additions for the period at Kshs. 22.8 Billion. Close to 80% of this CAPEX was spent in growth areas with the aim of sustaining growth in revenue. We continue to enhance our network in support of capacity upgrade and experience as well as investing in our IT capability.

Ladies and gentlemen,  thank you for your time. Let me now hand you back to Peter for revised FY 22 guidance and concluding remarks.

Revised FY22 Guidance & Outlook

Peter [00:28:40]: Thank you, Dilip. Ladies and gentlemen, we are pleased with the solid performance delivered in H1 of FY2022. We remain committed to protecting shareholder wealth and putting our customers first.  During the FY2021 announcement, we gave guidance based on the projections that guided the outlook for the year. At the time, we hadn’t won the telecommunication license in Ethiopia. The outlook of the economy has improved with Kenya staging partial recovery from a depressed performance last year.

In view of this and expansion to Ethiopia, we expect earnings before interest and tax as you can see on the screen in the financial year 2022 to be in the range of Kshs. 97-100 Billion and CAPEX which is capital expenditure to be in the range of Kshs 70-73 Billion inclusive of Ethiopia. On an underlying basis excluding Ethiopia, we revise our earnings before interest and tax guidance given back in May 2021 from Kshs. 105-108 Billion to the range of Kshs. 107-110 Billion, and maintain the CAPEX guidance given before at Kshs. 40-43 Billion for the financial year 2022. 

In conclusion, ladies and gentlemen,  looking into the future we firmly believe that our business is well-positioned to support our customers and provide technology solutions as we turn the business into a purpose-led technology organization. Our future is based on our brand promise “To Go Beyond”. To go beyond for our customers, to go beyond for our products and services.

I would like to thank our Board for the support accorded to me and my leadership team. To Safaricom staff, thank you for all the hard work you put in during a tough and uncertain period which together we’ve managed to accomplish the big milestone of winning the telecommunication license in Ethiopia. To all our stakeholders, I thank you for your confidence in Safaricom. We are excited about the possibilities and the opportunities that lie ahead. Ladies and gentlemen, thank you for joining us virtually this morning. I thank you for your time and keep safe.

Vote of Thanks

Stephen [00:31:21]: Thank you, Michael, Peter, and Dilip. Ladies and gentlemen, we have now come to the end of our half-year results announcement. The members of the media and bloggers present today will have an opportunity to ask your questions at a separate virtual press conference which will take place shortly. Invites for this event have already been sent out to you.

On a personal note, I would like to mention that this will be my last investor briefing engagement as Safaricom’s Chief Corporate Affairs Officer as I transition to take up my new role at Vodacom Group. As a shareholder, I look forward to future presentations and I wish Safaricom every success as it continues to implement its vision of transforming lives. Once again, we appreciate you all for making time to join us today on behalf of the entire Safaricom family I say, Asante sana. Have a good day and stay safe.


Press release:


E-commerce in Kenya: Copia Works!

I talked to my mum last week as she was on her way to refill her gas cylinder and could feel her pain thousands of miles away. LPG prices in Kenya have gone up by 16% as of 1st Jul 2021 due to the reintroduction of VAT on the commodity. Her budget was already stretched, having supplemented her fuel with eco-friendly briquettes.

Speaking to a friend recently, I came across Jiko Okoa by Burn Stoves which works really well with briquettes. I thought this would work really well for my mum and quickly went online to look for it. It is listed on all major Kenyan e-commerce sites including Jumia and Copia.

My elderly mum lives 7kms away from the nearest supermarket. There are small shops closer home, but prices and variety are not the best. Every so often she used to use a matatu to shop at the nearest supermarket where prices were better until Copia activated her locality.

Copia Agent Network in Kenya – Source: Copia

​​Three years ago while visiting home, we ran out of cooking oil and instead of sending someone to get a replacement, my mum said,

“If we can make this work for the night, I have cooking oil and other items arriving from Copia tomorrow morning.”

“What is Copia?” I asked.

She explained to me that she can pre-order items from Copia at a local shop and get them delivered in 1-2 days at no extra cost. Over time, Copia became part of her shopping routine because it saves her money and time. The Copia agent is nearby and she needs not worry about carrying her shopping over long distances.

When I saw the briquette stove on Copia, it was a no-brainer! But could I place an order while being thousands of miles away in a different country? I quickly created an account, added the item, and processed the transaction using my card.

At checkout, I had the option to declare that I was buying the item for someone else as was prompted for delivery details. An SMS and email confirmation was received and to calm myself, I opened up a customer support session to verify if the order had captured the recipient details via the live chat option. The agent quickly figured out that I was there to inquire about ordering, which I found rather appealing. She confirmed that all was well and I informed my mother at about half-past 8 that Friday morning.

“Because today is Friday, it’ll be here Monday morning,” she said assuredly.

At exactly 11am the same day, I received another SMS that my order was scheduled for delivery on Monday. And at 09:26am on Monday morning, another SMS confirmed that the order had been delivered to the agent for collection. Buried in my Monday morning work routine, I didn’t get to call my mum until in the afternoon.

“I got an SMS that the jiko was delivered at the agent this morning,” I announced.

She laughed then said,

“I picked it a long time ago. We’ve even used it to cook already!”

While I was amazed at Copia’s reliability and efficiency, she was really casual about it. I took a moment to think about it. A 79-year-old, semi-literate woman to whom e-commerce has become the norm. Although she doesn’t have a smartphone, she still shops online by placing orders on her account through the agent, then pays via M-PESA. She has no clue how digital her life is. I’m sure she never even pauses to think about the technology that makes all those things possible for her. 

Well-designed technology and systems significantly improve people’s lives without demanding much adjustment from them. Copia and M-PESA don’t demand high-end devices or literacy. They work seamlessly, especially at the bottom of the pyramid contexts.

In a country where delivery is a nightmare not only because of high costs but also lack of last-mile addressing systems,  the agent model, as seamlessly as it revolutionized banking, is proving itself revolutionary for e-commerce and Copia are leading the way.

Seated over 5000kms away, I was able to order something for my mum and have it delivered 200m from home, without breaking a sweat. Three days post-delivery, I received an SMS thanking me for shopping with Copia. They also asked how I learnt about Copia. The SMS provided 10 multiple choices and assurance that sending the answer back was free. The SMS was in Swahili, which shows inclusivity as more people would be able to read and respond compared to communicating in English. This is a service level I get in bigger cities with established e-commerce ecosystems, and for that, Copia deserves credit. They are truly living up to their slogan “Maisha rahisi”, because they’ve made my mum’s and my life easier.

The article is written by Wanjiku Njuguna

Safaricom’s Entry to the Ethiopian Market: An Explainer

Safaricom recently released details on the structure of its entry into the heavily state-dominated Ethiopian telecoms market, outlining the vehicles it would use in this venture, the license it has been granted by the Ethiopian Communications Authority, and how it expects to operate in the most populous country in Eastern Africa. The Global Partnership for Ethiopia (GPE), a consortium that Safaricom is part of, won one of two New Telecommunications Licenses – a 15-year license that comes with the right to apply for a 15-year extension. The partnership consists of Safaricom (Kenya), Vodafone Group (UK), Vodacom Group (South Africa), CDC Group (UK), Sumitomo Corporation (Japan), and Development Finance Corporation (US-DFC). The bid for the license pitted the GPE against an MTN Group Limited-led consortium that had the Silk Road Fund and a Chinese Investment Fund as members

Safaricom’s share price hit an all-time high on this news in previous trading action.

Consortium Composition

Following the award of the license, the consortium paid an $850M (Kshs 91.72B) fee to the Ethiopian Government through the National Bank of Ethiopia. To position itself for entry into the market dominated by the state-owned Ethio Telecom, Safaricom has subsequently formed a series of consortium companies. According to a recent public announcement, Safaricom has formed a special purpose vehicle Vodafamily Ethiopia Holding Company Limited (the SPV Company), a limited liability company incorporated in England. The SPV Vehicle is 90% owned by Safaricom, 10% by Vodacom International Limited, and 1 share by Vodafone International Operations Limited.

This SPV will own the majority shareholding (61.9%) of the Global Partnership for Ethiopia BV (GPE), a holding company incorporated in the Netherlands. In an interview with Julians Amboko, Safaricom CEO Peter Ndegwa noted that the move to incorporate GPE in the Netherlands is influenced by a Bilateral Investment Treaty between the Netherlands and Ethiopia – which provides the consortium with some advantages that may accrue resulting from tenets of the Treaty.

This holding company in turn owns Safaricom Telecommunications Ethiopia PLC – a company incorporated and registered in Ethiopia. The Ethiopian Communications Authority granted the company a nationwide full-service Unified Telecommunications Service License effective July 9, 2021. The company’s shareholding is Safaricom (55.7%), Vodacom (6.2%), Sumitomo Corp. (27.2%), and CDC Group (10.9%).

The creation of these entities is subject to approval by shareholders in an AGM slated for July 30, 2021. The final legal vehicle for entry into the Ethiopian market excludes the US Development Finance Corporation – an original member of the consortium during the bidding process.

In an official visit to Ethiopia, Kenya’s President Uhuru Kenyatta witnessed the formal issuance of a telecommunications license to Safaricom’s consortium. While the President was in the country for other bilateral issues, the issuance ceremony also reflected the interest of the Kenyan Government in the transaction given that it has a 35% shareholding in the telco. It further highlights how significant the entry into the Ethiopian market by Safaricom is. The high-level engagement around this process could also be a harbinger of Ethiopian authorities’ reception towards Safaricom’s entry into the market and a sign of Ethiopia’s commitment to the economic reform and liberalization process.

Today’s ceremony is the first step in an exciting and rewarding opportunity for Ethiopia. Kenya has seen the great gains and opportunities unleashed by Safaricom across the entirety of our socio-economic landscape. Ethiopia now stands at the cusp of making even greater strides in Safaricom’s areas of strength; which include digital presence, mobile money, telephony, data and fibre connectivity, and business solutions.

Kenyan President, Uhuru Kenyatta

The Global Partnership for Ethiopia (GPE) has also recently appointed Anwar Soussa as the Managing Director of the Opco in Ethiopia, effective 1st July 2021. Anwar, who is currently the Managing Director of Vodacom DRC and the Chairperson of Vodacash (M-PESA), is tasked with the execution of the consortium’s goal to bring about transformational economic and social impact in Ethiopia and positively enhance the lives of its people. He will report to the Board of the Ethiopia entity and Safaricom PLC CEO.

Mobile Money and Data Pricing Dynamics

The license awarded to the consortium does not include a license to operate mobile money, one that would have allowed Safaricom to roll out its jewel M-Pesa in the Ethiopian market. In the last financial year, M-Pesa’s revenues accounted for 33% (Kshs 82.65B / $765.96m) of service revenue (Kshs 240.84B / $2.23B), and 31% of total revenue (Kshs 264.03B / $2.45B). Voice revenue numbers averaged 33% (Kshs 82.55B / $765.08m) of service revenue, or 31% of total revenue. These numbers are available from their statements here

This shows how significant voice and M-Pesa are as revenue drivers to Safaricom in the Kenyan market. The Ethiopian market presents different dynamics for Safaricom. Prices for voice are well below what Safaricom charges, which could have a bearing on revenues depending on Ethio Telecom’s delivery of services (Safaricom has had an exceptional run in this regard in its local market). Below is a table showing the comparison of prices charged by Ethio Telecom and Safaricom for voice and data for the Ethiopian and Kenyan markets respectively.

Ethio Telecom’s lower prices would effectively undercut Safaricom. However, as demonstrated in the Kenyan market, while pricing may seem to be an attractive selling point, service delivery is likely to be the determining factor for consumer choice and preference. Of concern is whether Safaricom will be able to access the robust state-controlled infrastructure considering that Ethiopia, as of now, does not permit the setting up of third-party tower operators.

Ethio Telecom’s flagship mobile money service, Telebirr, which was launched earlier in May has given consumers incentives in a bid to shore up its usage and increase adoption amongst Ethiopians. The promotion shown below illustrates how Telebirr has been incentivizing customers to adopt the mobile money service.

The service has outlined plans to recruit 21m users in 1 year and 33m users in 5 years. Projections indicate that 40-50% ($38.37B – $47.96B) of Ethiopia’s $95.91B GDP will be transacted on the platform, a significant change from the current status where over 70% of utility bills, wages, and Government-to-Person transfers are transacted in cash. After more than a decade of M-Pesa’s operation in Kenya, recent disclosures show that an equivalent of 214.28% of the GDP was transacted on the platform in the last financial year. This shows that mobile money can cause massive shifts in transaction modes.

Telebirr will have a head start in Ethiopia, but over the long haul, customer choice and preference might shift based on the innovations of the mobile money products, should Safaricom get a mobile money license to operate there. Notably, innovative products anchored on M-Pesa, e.g M-Shwari, Fuliza, and Bank-M-Pesa facilities have contributed to the entrenchment of M-Pesa as a product in Kenya through easy availability and network effects.

For Safaricom to replicate this in Ethiopia, it will require massive cooperation with State Agencies, something that Ethio Telecom looks likely to win over quickly based on its State backing.  Telebirr has already made strides in regards to bank integration and linkages, with the mobile money service announcing that users can transfer funds from their bank accounts to their Telebirr accounts in two banks – the Commercial Bank of Ethiopia and the Bank of Abyssinia. These banks have integrated their systems with Telebirr, with other banks expected to follow suit.

Capital Expenditure

The Director-General for Ethiopia Communications Authority hinted at a 6 to 9-month pre-operational period, with the Kenyan Telco fully operating in Ethiopia in early 2022. Safaricom’s operations in Ethiopia will require significant capital investment in the early years for setting up operating infrastructure, with  Ethiopia’s Prime MinisterAbiy Ahmed Ali indicating a Foreign Direct Investment to the tune of $8B – the single largest FDI into Ethiopia to date.

In YoY terms, Safaricom’s FY21 CapEx declined 3.2% to Kshs 34.96B ($324m). Its FY22 guidance outlined CapEx spending in the region of Kshs 40 – 43B ($370.71m – $398.52m). With the move to Ethiopia, we expect that there will be a reversal in this trend with capital expenditure increasing in response to initial investment requirements in the Ethiopian market. Massive initial capital outlays also mean that there are no dividends to be expected soon from Ethiopian operations.

Because this is an investment which demands significant capital expenditure at the start, you don’t expect that dividends will be coming through in the early stages. We are quite comfortable that by the time we need to start transacting on dividend payouts to shareholders we expect the liberalization will be in play

Safaricom CEO, Peter Ndegwa

The expansion into Ethiopia may, however, not have implications on dividend payouts for local operations.

Our dividend payout which is 80% of net income for the year remains unchanged. We have enough balance sheet flexibility to be able to support a dividend policy, which is what we have been paying so far. So, the dividend policy doesn’t change and that will remain in force going forward.

Safaricom CFO, Dilip Pal

Our SWOT Analysis


  • Experience – Safaricom has a wealth of experience in telecommunications. It is, in large part, responsible for the digital transformation that Kenya has experienced in communications and mobile money transactions. With this experience and key learnings along the way, Safaricom has an edge in its rollout into the Ethiopian market.


  • Localization – Safaricom’s telecommunications operations have been untested in other markets. Despite its impressive and successful run in the Kenyan market, the company is likely to face headwinds due to uncertainties around rolling out operations in a foreign market.


  • Population Size – We are looking at a 117m population with over 56% aged 15 years and older. This is a massive market. Scale and network effects can provide Safaricom proper footing to establish a competitive presence in that market.

Source: Statista

  • Mobile Money License – Ethiopia’s Prime Minister Abiy Ahmed has noted that mobile-based financial services would be open to competition starting May 2022. In his official visit to Ethiopia, Kenya’s President Uhuru Kenyatta also urged the authorities there to open the market to mobile money services. This could unlock more opportunities for Safaricom to increase its products and offerings in that market.
  • Mobile Communication Penetration – With the penetration of mobile communication is just over 40%, the Safaricom CEO expects that the entry of new players in the market would push it to over 90% in a few years.


  • State Involvement – State-owned Ethio Telecom has government backing. Subsidies and other related actions would mean market players operating under unequal terms of engagement. It is likely that the State will engage in such practices to protect its interests. 
  • Political Instability – Ethiopia has a history of political turmoil. The war in Tigray has destabilized the political environment and consequently attracted international scrutiny and sanctions from the US government. US economic sanctions against Ethiopia have threatened to put the US International Development Finance Corporation’s $500m financing deal to the consortium in jeopardy. Safaricom acknowledges the political risks it faces in the country but views entry into Ethiopia as a long-term investment.
  • Capital and Foreign Exchange Risk – The State controls the movement of capital and foreign exchange in the country, which might hinder optimal operations if not liberalized. Cross-border money transfers on the platform might be subject to government policy. Importation of crucial technical equipment to set up operations will require foreign currency. Over the long term, repatriation of profits will need forex outlay. State involvement in the forex market, therefore, remains a key area of concern in Ethiopia. However, the Safaricom CEO notes that the Ethiopian government is undertaking foreign exchange liberalization which is expected to ease the FX market by 2023. In relation to other downside risks it faces, he noted the company would be taking appropriate risk insurance to secure the business in that market.

More Entrants?

It is likely that the Ethiopian government will issue a second license, with speculation around the possibility of the license allowing the operation of mobile money. If this happens, South Africa’s MTN Group, whose consortium was outbid by Safaricom’s due to a lower $600m bid, has shown interest in bidding again if mobile financial services are included in the license.

For us, it will really be important to see mobile money in that opportunity to put forward a bid and if it’s not there then probably we wouldn’t even bid. We really wanted to have seen mobile money in the licence regime, so we adjusted our bid for the lack of mobile money.

MTN Group CEO, Ralph Mupita

While a third entrant into the market means increased FDI for Ethiopia and a better chance at challenging Ethio Telecom, it would also mean increased competition for Safaricom. In an effort to liberalize the economy, Ethio Telecom has also launched a tender process to sell a 40% stake to private investors. The stake sale will see the government retain 55% of the telco. 

It is 40% to all interested bidders and 5% will be dedicated to Ethiopians. The 55% will remain with the government of Ethiopia.

Senior Advisor at the Ministry of Finance, Brook Taye

In sum, whichever way this entry goes, it will a defining moment for Safaricom.


*The USDKES rate used in computations in the article is $1 = Kshs 107.90.

Last-minute Tips for Tax Returns in Kenya

Have you filed your 2020 tax returns? Here are some last-minute tips

The filing of annual tax returns for the year 2020 for individuals and corporate entities with a December year-end is due on or before 30th June 2021. The returns are to be filed through Kenya Revenue Authority’s (KRA) online iTax platform.  

iTax platform

As of June 20th, 2021, over 3.8 million Kenyans had filed their returns successfully, translating to over 20 percent growth compared to the 3.1 million who had filed their returns by the same period the previous year. KRA Marketing and Communication Deputy Commissioner Ms. Grace Wandera attributed the increase in the number of returns filed to the current stability of the iTax system. 

For submission of returns through iTax, taxpayers with employment income only can use the web-based pre-populated income tax return, labeled ‘ITR for employment income only’. Individual taxpayers with other income in addition to employment income are required to download the excel income tax return to make their declarations. Persons who did not earn income in the year 2020 are reminded to file a Nil Return.

Following the Covid-19 pandemic that has led to restricted physical visits to public facilities, KRA has put in place measures to virtually support taxpayers who may need assistance during the filing season. Taxpayers are advised to seek KRA’s support through the Contact Centre by calling 0711-099-999 or 020 4 999 999, emailing requests to or using our official social media pages for assistance. KRA has also been running aggressive campaigns on both broadcast, print and social media platforms providing step-by-step guidelines on filing the tax returns. 

Many Kenyans still procrastinate when it comes to filing their tax returns. As you make a last-minute dash, remember that failure to file by the due date attracts a default late penalty of twenty thousand shillings and two thousand shillings for a company and for an individual respectively in line with Section 83 of the Tax Procedures Act, 2015.

Safaricom Full Year 2021 Results Earnings Call Transcript

Company Participants

Peter Ndegwa – CEO

Michael Joseph  – Chairman

Dilip Pal – CFO

Stephen Chege – Chief Corporate Affairs Officer


Stephen Chege: [01:10] Good morning, ladies and gentlemen, and welcome to the financial results announcement for Safaricom PLC for the full year 2020/21. On behalf of our Board of Directors, the management team, and the staff of Safaricom PLC, we thank you very much for making time to join us virtually for this event. I’m glad, and thanks to technology, which is our foundation of our business, that we can virtually connect and engage this morning. We hope that you are all keeping safe, masking up, washing hands, and observing the required precautions and protocols to help us manage the COVID-19 pandemic.

We will start off with remarks by Michael Joseph, the Chairman of the Board of Safaricom PLC; followed by Safaricom PLC CEO, Pete Ndegwa; and thereafter, Chief Financial Officer, Dilip Pal, will take us through the financial performance and results for the period under review. Should you like to keep your social media followers updated, our hashtag for today is #SafaricomFYresults. In staying committed to our promise on diversity and inclusion, our sign language interpreters for this morning are Josephine Njeru and Monicah Mwangi. It is now my pleasure to invite Safaricom PLC Board Chairman, Mr. Michael Joseph, to make his remarks.


Michael Joseph: [02:38] Thank you, Steve. Fellow shareholders, representatives of the investor community, the Board, management, and staff of Safaricom PLC, members of the media, and the online community, good morning. Thank you for joining us this morning as we announce our full-year results for the financial year 2021 ending March 2021.

As I mentioned during our half-year results 6 months ago, we have operated this past financial year under very extraordinary circumstances. We started the financial year in April 2020 and the government-imposed lockdown, and we closed the financial year in yet another lockdown. During the year, the Board closely followed the management’s actions in order to ensure the well-being of our staff and customers. This included enabling of and authorizing staff to work from home and taking preventive action in our shops to ensure our staff and customers remain protected and safe. Ladies and gentlemen, the year was marked with a slowdown of economic activity due to the COVID-19 pandemic across the country. However, I am proud of the actions that Safaricom took, standing with the country and supporting the social distancing measures such as working from home and the use of global money at reduced rates for payments introduced by the government to curb the spread of the virus.

Ladies and gentlemen, while the pandemic had a serious adverse effect across this country, it’s brought out a key value in all of us, our resilience. In April of last year, we were anticipating an extremely difficult period ahead. However, despite the difficult circumstances, we have tried to find a way to make ends meet. When faced with tough challenges, our resilience comes forth and helps us forge ahead. The Board takes note of our business resilience during this time. We are pleased with the performance, especially recovery noted in the second half of the year. Our quarter 3 results showed a solid performance with positive momentum leading to a return to service revenue growth across all sectors. This provided an opportunity to give back to our shareholders and support them during these difficult economic times. As a result, we issued the first-ever interim dividend of Kshs. 0.45 per share, totaling Kshs. 18 billion.

Our quarter 3 results showed a solid performance with positive momentum leading to a return to service revenue growth across all sectors. This provided an opportunity to give back to our shareholders and support them during these difficult economic times. As a result, we issued the first-ever interim dividend of Kshs. 0.45 per share, totaling Kshs. 18 billion.

The disruption has also allowed us to think about the future of our business. The Board, together with Peter and the management team, have been considering how to position Safaricom to be future-ready. During the period under review, the Board approved a new strategic positioning that will move Safaricom from a telco business into a purpose-led technology organization. This strategy will see Safaricom focus on new business areas such as agribusiness, education, health care, financial services, and support for small businesses, including regional expansion. The Board will continue to monitor the execution and implementation of this strategy.

To effectively execute the new strategic direction, Safaricom will need the right regulatory framework and support. The Board looks forward to engaging with the relevant government functions to ensure awareness of the strategy and seek support in areas such as legislation, taxation, interpretation of laws amongst others. We are well aware of the importance of Safaricom to this country. It is our commitment that we will continue to invest in our business in order to assist in the success of this country overall.

In conclusion, ladies and gentlemen, as we go into the future, we are optimistic about the potential as management implements a new strategy of being a purpose-led technology company. I assure the shareholders that the Board is committed to working with the management to deliver value to them, but most importantly, in ensuring that Safaricom continues to be there for Kenya, for its customers, its staff, and the community at large, and our motto, Transforming Lives. With these remarks, I now take this opportunity to invite our Chief Executive Officer, Mr. Peter Ndegwa, to talk more about our strategy and the performance highlights for the financial year 2020/’21. Thank you.


Peter Ndegwa: [06:49] Thank you, Michael. Fellow shareholders, representatives of the investor community, the Board, management, and staff of Safaricom PLC, members of the media, and the online community, good morning. I’ve spent a considerable amount of time in my first year dealing with matters to do with COVID-19 pandemic. As Michael has indicated, COVID-19 has altered the environment for all businesses. And as Safaricom, we were not spared. Our purpose of transforming lives, however, was our guiding light in decision-making when the pandemic was declared in the country

I’ll now briefly talk about our commitment to this purpose of transforming lives. In pursuit of our purpose, we continued investing in community initiatives to help Kenyans weather the impact of the pandemic. We supported more than 1.1 million Kenyans through the Ndoto Zetu Campaign across all the 47 counties.

During this period, we launched the Safaricom sustainable series, which aims to bring together business leaders to discuss how to tackle some of the most pressing challenges of this decade. As a company, we’ve integrated sustainable development goals into its operations. We remain aware that for business to effectively support the achievement of the STGs, a shift in leadership mindset and redefined business model is required.

In staying committed to our promise of diversity and inclusion, we’ve enhanced our governance to attain a 50-50 overall gender split, with 34% women in leadership. In addition, 2.4% of our staff are people with disabilities. Ladies and gentlemen, on matters environment, we reduced our travel emissions footprint by 38% year on year, even though our overall carbon emissions rose by 8%.

Now I’ll talk briefly about our performance, in particular, giving you an indication of our H2 performance. Ladies and gentlemen, the government has deployed various measures in a bid to mitigate the spread of coronavirus. In response, we moved to provide solutions to our customers, easing their burden and helping in building resilience.

We supported working from home by doubling bandwidth to our home fiber customers for an initial period of 90 days, and furthermore, made the offer permanent at the end of the period. To ensure our school-going children continued with their education, we zero-rated websites hosting education material and provided access to SME — to SMS-based learning material. For business, we provided support via the extended M-PESA wallet where possible and offered generous credit facilities and upfront payment for services and goods to our partners and suppliers.

We continue to make a difference in the lives of the most vulnerable in society with initiatives such as Bonga For Good. In addition, we invested Kshs. 339 million cash through our foundations, supporting communities weather the pandemic challenges.

But perhaps the most impactful was facilitating reduced cash handling through a temporary zero-rating of all transactions below Kshs. 1,000. Over 1.7 billion transactions valued at Kshs. 4.4 trillion were zero-rated during this period. Following return to charging on zero-rated M-PESA transactions, we also reduced our M-PESA tariffs by up to 45% for lower-value transaction bands. We also made it easier for our customers to pay hospital bills by zero-rating pay bill costs to help facilities across the country. In addition, Safaricom hosted the national COVID-19 toll-free line call center that provided information and support to the country with over 300 of our call center agents on standby to support.

Over 1.7 billion transactions valued at Kshs. 4.4 trillion were zero-rated during this period. Following return to charging on zero-rated M-PESA transactions, we also reduced our M-PESA tariffs by up to 45% for lower-value transaction bands.

But our most critical support to our country was and remains ensuring network stability to keep the country connected. During this period, we accelerated network rollout, specifically for 4G, with over 1,000 new sites set up.

Now let me talk about delivering on our strategy and our mission towards a customer-obsessed digital-first organization. Our 4 transformative pillars are critical to the delivery of our 5-year strategy. We remain focused on bridging the digital divide through initiatives such as Lipa Mdogo Mdogo, double data on home fiber, and increased investment in 4G rollout.

We’ve seen a 40% growth in 4G devices on our network. This growth is driven primarily by accelerated 4G network investment and Lipa Mdogo Mdogo propositions which supports our customers in acquiring entry-level smartphones by paying as little as Kshs. 20 a day. From a regulator’s data, we are currently holding about 69% voice traffic share and 36% for fixed data subscriptions. We continue to be the technology partner of choice for business by offering relevant solutions. This segment has grown by 6% year-on-year to 726,000 customers. To support our micro and small and medium-sized enterprises, MSMEs, we introduced Pochi la Biashara, M-PESA Business App, the Business Manager, merchant transacting till, and self-onboarding process. We are set to launch the M-PESA app for the rest of the customers in the next few days.

Our growth strategy is also driven by cost leadership. In the reporting period, we delivered Kshs. 6.9 billion in savings by driving a cost optimization journey, and we are doing this in order to fuel new growth areas.

I’ll now briefly touch on our strategic focus on digital transformation enablers. We started the execution of our strategy in line with our goal of becoming a purpose-led technology company. To support this goal, we are evolving our organization model in order to become a truly agile organization. We are transforming our ways of working in order to sustain customer agenda and achieve deeper employee engagement, create a more intimate connection with our community and deliver more value to our shareholders.

In terms of our business ambition, we’ve launched the M-PESA Africa joint venture partnered with Google and Facebook for device financing. We are also leading a strong consortium and have submitted a bid as part of the competitive process for Ethiopia. Should we be successful, this will allow Safaricom access new growth opportunities for the long term. We are on track to deliver our ambition to deliver 100% 4G coverage, which is currently at 94%. And earlier this year, we launched 5G trials, which will continue to drive the digital propositions that we want to offer to our customers. We continue to leverage on data and analytics to drive growth and usage through personalized offerings

We are on track to deliver our ambition to deliver 100% 4G coverage, which is currently at 94%

In terms of our underlying KPIs, we see continued improvement. So despite the COVID-19 disruption on our business and the economy, we’ve seen a recovery trajectory on our underlying KPIs, particularly in the second half of the year. This growth is attributable to sustained investment in our network and our customer engagement. The trajectory realized in these KPI’s is also a positive sign of business resilience and opportunities for future.

Let me now talk about our performance in the context of our earning guidance. Ladies and gentlemen, we faced quite some turbulence here in the past 12 months. However, our business has delivered on the higher end of the guidance range, generating solid returns to our shareholders. We’ve achieved an EBIT of Kshs. 96.16 billion, ahead of Kshs. 91 billion to Kshs. 94 billion guidance range. We continue with our strategic investment in our network, achieving a CapEx investment of Kshs. 34.96 billion, in line with our guidance of Kshs. 35 billion to Kshs. 38 billion for the year. Our intention is to continue to drive smart investment aimed at delivering on our target coverage, enhanced customer experience, and business continuity in key performance indicators.

At this stage, therefore, I want to welcome Dilip Pal, our new CFO, to take us through the numbers in great detail.


Dilip Pal: [17:28] Thank you, Peter. Hamjambo mabibi na mabwana. I wish to welcome you all to our FY ’21 full-year results announcement. I hope you all are keeping safe, and thank you for taking time to join us this morning. Before I start, I would like to remind you that the presentation materials will be available shortly on Safaricom’s website. As Michael and Peter noted, we are operating under extraordinary circumstances and the effects of this pandemic are far-reaching, including its impact on our performance for the period. I will now take you through this in a bit more detail.

The impact of our response to COVID-19 in zero-rating M-PESA transactions weighed heavily on our performance. However, we saw gradual recovery in H2 with service revenue posting 4% year-over-year growth from a decline of 4.8% in H1. EBIT was flat in H2 from a decline of 10.5% in H1. We will unpack this a little more in subsequent slides. As Michael said earlier, faced with tough challenges, our resilience came forth and enabled us to force forward. Our strong balance sheet has allowed us to continue to make significant and important investments in the business to support its sustainability for the long term.

I am pleased to note that through the cost leadership pillar of our strategy, we were able to yield cost savings that helped elevate the pressure on EBITDA margin. We saw OpEx reducing 3.2% year-on-year driven by smart procurement, digitization, and operating model transformation. I’m also happy to note that our continued focus on providing relevant products to our customers yielded a 9.9% increase in our 1-month active subscribers for the period, with customers growing across all revenue streams as Peter noted earlier. 

Now looking at service revenue in a bit more detail. As the chart on the top left of the slide illustrates, there was a marginal decline in service revenue mainly attributed to voice and M-PESA revenues. I’m happy to note that mobile data and fiber-to-home growth nearly offset the decline in voice and M-PESA in the period, which we’ll speak a bit a little later. fiber-to-home performed very well for the period, driven by increased demand necessitated by working and schooling from home.

The graph on the bottom left demonstrates voice performance was under significant pressure in H1, but as Peter called out, strong customer value management offerings yielded a much stronger performance in H2. Moving across to the right of the slide, you can see that our service revenue profile has changed in this period with M-PESA now accounting for 33%, down from 33.6% last year, of course, impacted by free fees in P2P transactions in this period. Of interest is debt, M-PESA bounced back in H2, contributing up to 35.4% of service revenue compared to 33.5% in a similar period last year. We continue to see growth in the profile of mobile data and fiber-to-home now contributing 17.9% and 1.4%, respectively. The chart on the bottom right of the slide reiterates that we saw a lot of pressure in the first half with some recovery in the second. And we are encouraged by this momentum as we move into the new financial year.

Now to look at M-PESA in a bit more detail. Transfers was the most impacted segment within our portfolio, posting a year-on-year decline of 15%. As I called out earlier, the decline is driven by the zero-rating of transactions, which affected transfers and payment withdrawals recovered in the period from a decline in H1 attributed to the first quarter movement restrictions. On a positive note, international money transfer continues to perform strongly, growing 54.3% year-on-year. The last bucket in this graph is lending, which performed very well for the period, driven by Fuliza. In H2, we observed improved M-PESA performance as we illustrate in the bottom left graph. From a decline of 14.5% in H1, M-PESA performance improved to a growth of 10.1% in H2 year-on-year.

Looking at the graphs on the right-hand side of the slide, you can see a V-shaped recovery pattern across all main revenue streams, which is encouraging. It is driven by an easing of restrictions, opening up of the economy, continued innovation of our offerings, and a shift in consumer behavior more towards cashless transactions, a behavior we hope will remain in the future.

Looking at the same information this time from the perspective of values and volumes, the story looks more positive and the underlying health of the M-PESA ecosystem is evident. The value of M-PESA transactions increased 58.2% year-on-year with zero-rated transactions accounting for 19.9% of the total. Likewise, the volume of M-PESA transactions grew 29.8% year-on-year with zero-rated transactions accounting for 14.8% of the total. This is supported by the innovations made during the period, some of which Peter spoke about, with our transacting till as an example now contributing more than Kshs. 40 million a month in revenue.

In the period, we also accelerated our merchant tills with 1-month active tills almost doubling close to 300,000. The strength of the underlying KPIs, along with the innovation pipeline, will ensure that we are well-positioned to drive recovery in M-PESA as we continue to expand the number of use cases, enhance our offerings and drive convenience for our customers. Just to note, more details on M-PESA performance can be found in the booklet on our website.

Let me now move on to mobile data where, as digital adoption accelerates in our market, we are pleased with the commercial progress we are making. Looking at the top left of the slide, you can see consecutive growth half-on-half with an overall year-on-year growth of 11.5% for the period. Moving down the bottom left, you can see that growth is driven by enhanced 4G coverage, content aggregation and device financing. We continue to drive the 4G penetration strategy through device financing with over 200,000 devices sold under this program.

Looking at the box on the top right of the slide, you can see bundled customers grew faster than overall customers at 12.4% year-on-year. Similarly, you will also note that data customers consuming more than 100MBs and active 4G devices grew at a much faster pace of 19.6% and 39.8%, respectively, signifying an increase in data penetration in the period. Looking at the box on the bottom right of the slide, you can see that while the effective rate per MB has continued to decline, the usage per subscriber has continued to grow and at a faster pace. Thus, overall ARPU for the period increased 3.7%.

Now moving on to fixed data. As I mentioned, we are very pleased by the strong acceleration of our fiber-to-home business, which benefited from the work and study from home shift. This was the main growth driver for this revenue stream, growing 49.1% year-on-year. Moving across this chart to the right, you can see that fixed enterprise did not perform so well, impacted heavily with the closure of offices and some customers downgrading their packages. We have, however, seen a significant increase in the number of customers as can be seen from the graph at the bottom right of the screen, mainly driven by SMEs taking up our LTE offerings. However, this customer uplift is offset by ARPU erosion from a lower value offering. This customer segment remains a key focus for us as we expand our customer base beyond the larger enterprise space. The graph on the top right shows good momentum on home customers and also penetration, now with more than 50% of the homes pass being connected.

Ladies and gentlemen, as I called out earlier, earnings before interest and taxes recorded a decline of 5.3% year-on-year in the period, was driven by the loss of revenue from the zero-rating of M-PESA transactions, which put pressure on our contribution margin. We have also seen a shift in consumer behavior around M-PESA with deposits and the associated commission actually growing in the period. More details on the breakdown of our costs can be found in the booklet on our website. Moving across to the right, you can see a significant OpEx saving as the business focused on cost leadership to help mitigate the impact on our top line performance and some of the adverse cost movements in the period. Thanks to sustained operational efficiencies, we continued to observe improved OpEx intensity reducing from 18.2% in FY ’20 to 17% in FY ’21.

Lastly, looking at CapEx, we sustained investment in our network and systems with our capital additions for the year at Kshs. 35 billion. 68% of this CapEx was spent on growth areas aimed at securing revenue for the future. We continue to enhance our network in support of traffic growth, coverage and experience and investing in our IT capability, for example, in M-PESA, where we rolled out the latest version of the platform to facilitate faster product rollout and easier integration of APIs. I will now hand back to Peter, who will take us through FY ’21 dividends, guidance for FY ’22 and some concluding remarks.


Peter Ndegwa: [28:00] Thank you, Dilip. Ladies and gentlemen, I’ll now talk about our proposed dividends. As you’ve seen from the numbers, we’ve not been spared from a tough operating environment as evidenced by the dip in our service revenue, earnings before interest and tax and net income.

Despite this, we are committed to investing in the business and maintaining a consistent dividend payout ratio in line with our current dividend policy. During this period, the Board declared the first — for the first time an interim dividend of Kshs. 0.45 per ordinary share held amounting to Kshs. 18 billion. The final dividend per share of Kshs. 0.92 dividends per share amounting to Kshs. 36.86 billion has been proposed by the Board for approval at the next Annual General Meeting.

Let me now talk about the financial year ’22 guidance. Whilst we anticipate facing subdued operating climate in the short term and as we recover from the impact of the pandemic, our business is well placed to cope with the challenges arising from the pandemic. We are hopeful that the global and local efforts to stop the spread of the coronavirus through prevention actions such as vaccination will have a positive outlook for the mid to long term. In the meantime, we continue to leverage our strong balance sheet as we implement a new agile way of working that will ensure our total focus on the customer and build a stronger and more resilient business for our employees and all our stakeholders. As such, our guidance for the financial year 2022 is at the range of Kshs. 105 billion to Kshs. 108 billion for earnings before interest and tax. And for capital expenditure, our guidance is in the range of Kshs. 40 billion to Kshs. 43 billion.

So therefore, in conclusion, ladies and gentlemen, I want to thank the Board for their support during my first year in office. I look forward to continued support as we scale to new heights to achieve even more value for all our stakeholders. To my colleagues, thank you for your hard work, your dedication and your commitment, especially through this challenging year. Truly, you have embodied our purpose of transforming lives. I encourage all of you to stay on course as we go beyond on our journey to become a purpose-led technology company. To all our stakeholders, I thank you for your confidence in us. It is an honor to lead this great company into the next phase of our growth, and I’m excited to exploit the next opportunities that lie ahead. I thank you all for your time, and thank you very much.


Stephen Chege: [31:21] Thank you, Michael, Peter and Dilip. Ladies and gentlemen, we have now come to the end of our full year results announcement. For the members of the media and bloggers present today, you will have an opportunity to ask your questions at a separate virtual press conference, which will take place shortly. Invites for this event have already been sent out to you. Once again, we appreciate you making time to join us this morning. On behalf of the entire Safaricom family, asanteni sana. Have a good day, and stay safe.