Kenya's Biggest Company Slumps on Lower Earnings Growth Outlook

(Bloomberg) -- Safaricom Plc shares fell the most in four months after East Africa’s biggest company by market value said profit growth will slow even as the wireless carrier expands its popular mobile-banking service.

Earnings before interest and taxes will rise by as much as 9 percent in the year through March, compared with a 13 percent increase in the prior period, the Nairobi-based company said in a statement on Friday. Higher taxes and inflation are among factors putting pressure on the consumer, Chairman Nicholas Nganga said at an investor briefing.

The guidance for 2019-2020 earnings “is weak,” Tracy Kivunyu, a senior analyst with Tellimer Markets Inc., said by phone from Nairobi. “That’s worrying.”

The outlook overshadowed Safaricom’s declaration of a special dividend on the back of a strong balance sheet and growth in mobile money to almost a third of total revenue. Part-owned by South Africa’s Vodacom Group Ltd., the carrier controls about two thirds of the Kenyan market and is seeking to expand into other countries.

Ethiopia Plans

Vodacom and Safaricom plan to take over the intellectual property rights for M-Pesa, the main mobile-money product, from Vodafone Group Plc, Vodacom’s parent, and roll out the service to other African nations, Chief Executive Officer Bob Collymore said in an interview after the presentation.

Safaricom plans to provide a mobile-money services platform for a bank operating in South Sudan, the CEO said. In Ethiopia, Safaricom is already providing state-owned monopoly Ethiopia Telecommunications Corp. with fiber connectivity, call termination and airtime advance for customers, he said, and the partnership has potential to be expanded.

“We are looking at a broader relationship with EthioTel,” he said, without giving details. “No agreements have been signed yet, but we are hopeful about signing something this year.”

Ethiopian Prime Minister Abiy Ahmed has indicated an intention to part-privatize EthioTel, a move likely to attract major telecommunications players keen to tap into Africa’s second-most populous country.

Safaricom shares slumped as much as 4.1 percent, the most since Jan. 4, and traded 1.9 percent lower at the close in Nairobi. The stock has gained 31 percent this year.

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