Safaricom delivers resilient performance amid COVID-19 challenges
For the first time in nine years, Kenya's biggest telecoms operator, Safaricom, has posted a drop in its full year core earnings. The CEO of Safaricom, Peter Ndegwa spoke with CNBC Africa's Arnold Kwizera for more.
Fri, 14 May 2021 10:17:19 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- Safaricom navigates a decline in core earnings due to COVID-19 impact, with a recovery in the second half of the year.
- Company's strategic decisions on free P2P transactions and digital services show a focus on customer support and innovation.
- Safaricom maintains a dual business model integrating telecom and financial services while emphasizing responsible practices and regulatory compliance.
Safaricom, Kenya's largest telecom operator, recently announced a decline in its full-year core earnings, marking the first decrease in profits in nine years. CEO Peter Ndegwa discussed the company's performance with CNBC Africa, highlighting the impact of the COVID-19 pandemic on their financial results. Despite the challenges faced, Safaricom managed to bounce back in the second half of the year, achieving almost flat service revenue after a 5% decline in the first half. The slight drop in profits was attributed to the free person-to-person (P2P) transfers on M-Pesa introduced to support customers during the pandemic.
Ndegwa clarified the company's decision to offer free P2P transactions for nine months, emphasizing the collaborative approach with regulators. While initially aimed at promoting a cashless economy and easing the effects of COVID-19, Safaricom eventually resumed charging for the service in January, with reduced transaction costs. Despite concerns about customer satisfaction post-implementation, the company witnessed stable M-Pesa business, indicating continued support and acceptance of the revised charges.
The interview also touched on Safaricom's focus on digital services, with an 11.8% increase in digital uptake reflecting a shift towards internet-based solutions. Ndegwa acknowledged the shifting landscape of the telecom industry, emphasizing the importance of data services over traditional voice communication. The company's accelerated rollout of 4G coverage, reaching 94% and set to expand further, underscores their commitment to enhancing connectivity and customer experience.
Addressing questions about Safaricom's dual business model encompassing telecom and financial services, Ndegwa dismissed speculations about a potential split. Instead, he outlined plans to leverage both sectors to drive financial inclusion and support small and medium enterprises. By offering affordable credit options and innovative products like device financing, Safaricom aims to empower customers while ensuring regulatory compliance and responsible practices.
Ndegwa also responded to concerns about Safaricom's market dominance, asserting the company's commitment to delivering value across a broad stakeholder base. With a significant customer base and extensive infrastructure investments, Safaricom plays a vital role in Kenya's digital ecosystem. The CEO emphasized the company's responsible approach to operations, regulatory compliance, and societal impact.
In a discussion about Safaricom's expansion into the Ethiopian market, Ndegwa remained cautious due to the ongoing competitive process for telecom licenses in Ethiopia. While refraining from detailed comments on mobile money regulations in Ethiopia, the company awaits the final outcome of the bidding process before announcing future plans.
Looking ahead, Safaricom anticipates core earnings to rise between 105 billion and 108 billion Kenyan shillings for the upcoming financial year, offering positive prospects for shareholders. While dividend guidance remains undisclosed, the company maintains a stable dividend policy aligned with its financial performance targets.
In closing, Ndegwa refrained from speculating on Safaricom's future involvement in cryptocurrency or digital payment solutions beyond their existing financial services framework. The company remains focused on its current strategy, with any potential developments to be communicated in due course.