Profit Drops at Kenya’s Biggest Company on Stalling Economy

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Safaricom Plc said first-half profit dropped as the Covid-19 pandemic restrained growth in the wireless carrier’s biggest market of Kenya, while revenue was dented by a waiver on fees at its flagship mobile-money service.

The East African country’s largest company felt the impact from the coronavirus “on various sectors of the economy,” Chief Executive Officer Peter Ndegwa said at a briefing Monday in the capital, Nairobi. “Like everybody else, we were not spared.”

Net income fell 6% to 33.1 billion shillings ($303.8 million) in the six months through September, while revenue retreated 4.1%. Safaricom used IFRS15/16 accounting standards to report the earnings, compared with a mix of that and IFRS15/IAS17 the previous year.

Wireless carriers including Safaricom have had to battle a fall in revenue from lower business activity even as more home working has boosted household data bills. The company faced a further challenge when the Kenyan government said it should waive transaction costs on mobile-money service M-Pesa, to help encourage cashless payments to help control the spread of the virus.

Earnings from the platform dropped 15%, even as the value of M-Pesa transactions jumped by a third, the company said. Two-thirds of Kenyan mobile-money users are on the network, meaning any recovery in output by East Africa’s biggest economy could translate to a bounce back in fortunes.

Safaricom shares traded 1% lower at 31 shillings at 2:13 p.m. in Nairobi, after declining as much as 4.2% in earlier trade.

Mobile Lending

Mobile-phone loan disbursements jumped by a third as struggling Kenyans borrowed small amounts of money for short periods to tide them over during the pandemic. The contribution from an overdraft lending product known as Fuliza to M-Pesa revenue grew by 61% in the six months.

Fuliza is growing rapidly and contributing more than similar lending products offered through KCB Group Ltd. and NCBA Group Plc, according to Gerald Muriuki, an analyst at Nairobi-based Genghis Capital.

“It is a product that is barely two years old in the market, so it tells you there is a lot of demand for credit facilities,” he said.

Safaricom expects full-year earnings before interest and tax to be in the range of 91 billion shillings to 94 billion shillings, a decline of as much as 11%, while capital expenditure is projected to remain in the range of 35 billion shillings to 38 billion shillings, in line with the previous year, Ndegwa said.

Safaricom is targeting full 4G coverage across the country by the end of the year from 91% currently, the CEO said.

©2020 Bloomberg L.P.

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