It was in the aseptic atmosphere of an empty press room that Safaricom’s managers once again demonstrated the financial strength of the group they lead.
Managed – remotely – since the end of March by the Kenyan Peter Ndegwa, the telecommunications operator has recorded a turnover of 262.5 billion Kenyan shillings for its 2019 financial year, or more than 2.23 billion euros with profits before interest (Ebit) up 13.5% compared to 2018 at 101 billion shillings.
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This double-digit growth is driven by an unprecedented reduction in operating expenses. And of course by its flagship application, M-Pesa, available in 167 countries, which alone contributes 12.6% of the group’s growth (33.6% of revenues in 2019).
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Another dynamic segment, mobile data, particularly via 4G, recorded revenues of 40.7 billion shillings, up 12% year-on-year.
This was not without risk for the operator, which launched an unlimited voice and data offer in October. The latter already accounts for 40% of the segment’s revenues.
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Peter Ndegwa is determined to pursue mobile penetration in Kenya, which he considers “perfectible”, and following the results announced a partnership with Google to offer one million smartphones at twenty shillings per month, which will be available on the market for nine months.
Highly profitable “apps within the app”
The M-Pesa and mobile data diptych is therefore now the growth lever that is offsetting losses on traditional voice (-8 points compared to 2017) and messaging (-1.4 points compared to 2017). This is a vein that is more than ever to be exploited for the firm controlled by the British company Vodafone through its pan-African subsidiary, Vodacom, domiciled in South Africa.
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This is why the Vodacom-Safaricom duo has created a joint venture with full powers to make M-Pesa a “super-app” to provide for various needs such as booking taxis, making various appointments or paying for various services by mobile phone.
Safaricom launched new services as early as 2013, with M-Shwari, Fuliza and KCB M-Pesa came later to provide savings and micro-loans.
By 2019, these “apps within apps” will account for two-thirds of M-Pesa’s revenues (84.4 billion shillings in total). “Remittances are still performing well and are up 14.6 per cent over the previous year,” said Sateesh Kamath, Safaricom’s chief financial officer.
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Safaricom, a central player in the Kenyan economy, has abolished commissions on remittances in the fight against coronavirus since 15 March and is maintaining this decision until June. “Although this decision affects our business, we are absolutely convinced that it was the right thing to do to support the people,” Kamath said.
Legal arm wrestling
While this is positive and is taking place in a market that is favourable to say the least, both from a regulatory and competitive standpoint – Safaricom took nearly 65% of the mobile market in the second quarter of 2019 – the group’s development is not without a few pitfalls.
On the one hand, the merger of its two competitors, Telkom Kenya and Airtel Kenya, is likely to challenge its market dominance.
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In addition, in August 2019, the Kenyan gambling regulator, fearing the social impact of gambling, ordered the operator to cease its sports betting activities. This decision caused a shortfall of 1.9 billion shillings for M-Pesa in 2019.
The Kenyan operator has also been engaged since February in a legal tug-of-war with East African Data Handlers (EADH), a company specialising in data retrieval, archiving and analysis.
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Safaricom is accusing the service provider responsible for managing the services Lipa na M-Pesa and Buy Goods Platforms (invoice payment and purchase of goods and services, both hosted by M-Pesa) of having embezzled 20 million shillings in 2016.
In its defence, EADH in turn accuses Safaricom of having consciously and voluntarily allowed certain employees of the operator to access customer data in order to carry out fraudulent transactions.
At the same time, the group created in 1993 is accused by Benedict Kabugi Ngungu, at the initiative of a petition against the operator, of stealing the data of 11.5 million customers.
While not yet judged on their merits, these two conflicts involving the country’s most powerful company echo a broader national debate on data confidentiality and privacy rights and could tarnish the operator’s reputation.
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