[2008-05-27]  Safaricom set to announce record annual profit
Leading mobile telephone operator Safaricom Ltd is set to release its 2008 results today just a few days to the announcement of its Initial Public Offering (IPO) outcome. The company is expected to announce record profit for the third year running on the back of more investments in data services and money transfer services that portend higher returns in the medium term. It has also steadied itself against competition pressures by lowering its calling rates and introducing a cheaper airtime denomination of KSh20. The commercial launch of Safaricom’s third generation 3G mobile technology yesterday, enabling roll out of multimedia services such as video and television on mobile and faster Internet connection heralds a new income stream. Its money transfer service — M-pesa— also promises to be a cash cow in the near term. Yesterday, Michael Joseph said Safaricom was diversifying beyond its traditional mobile voice service, to an integrated voice and data provider, enabling computer to computer communication for businesses and consumers. High speed broadband Internet services on mobile or in a fixed office environment using the enhanced 3G network, he said, would eliminate perennial challenges of limited fixed network infrastructure. It would also make Internet services more affordable. “The high-speed broadband service is well managed, packaged and priced to be competitive,” he said In a bid to increase its Average Price Per User (ARPU), the company has moved to enhance subscriber loyalty by rationalising its tariff structures. Under this initiative, four tariff plans are being withdrawn and a flat rate KSh10 a minute tariff introduced. The introduction of the KSh10 tariff came just a few months after the introduction of the lowest scratch card airtime valued at KSh20 mainly seen as targeting the low income bracket who might be having handsets but cannot afford the higher denomination cards frequently. During the nine month period ended December 2007, Safaricom’s blended ARPU rates dropped to KSh650 from KSh816 in 2006, with pre-paid ARPU dropping from KSh583 from KSh705. The company, with a subscriber base of 9.2 million, had by December surpassed KSh20 billion in earnings before income tax, depreciation and amortisation (EBITDA). For the year to March 2006, the earnings were KSh17.2 billion. Operating profit, at KSh14 billion, was also higher than the KSh12.6 billion made over the corresponding period in 2006 as was profit before tax at KSh15.7 billion compared to KSh12.1 billion previously. By December last year, revenues also increased to KSh45 billion, compared to Sh34 million the year before, while operating expenses increased to KSh19 billion from Sh13 billion the previous year.


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