Kenya’s Safaricom Registers Record Profit Growth

Mergers, Acquisitions and Financial Results

Last Tuesday Safaricom reported record profits and announced plans to boost coverage in the rural areas as a strategy of growing its customer base in the face of mounting competition.

Telkom Kenya and Econet Wireless are expected to launch mobile phone services later in the year, adding competitive pressure in a market Safaricom has dominated for nearly a decade. With earnings before interest, taxes, depreciation and amortization or Ebidta of Sh28.1 billion representing a growth of 15 per cent.

Safaricom for the third year running has emerged as the most profitable company in Kenya and among the best in sub-Saharan Africa. This is expected to raise interest in its shares, which are expected to begin trading at the Nairobi Stock Exchange in early June. Net profit, which represents the money available to shareholders hit Sh13.8 billion, reflecting a 15.3 per cent increase. The operating profit however grew at a modest rate of 3.8 per cent to Sh18.5 billion, revealing the extent to which the business was unable to reign in costs as its expansion plan gathers pace. Safaricom's revenue rose to Sh61.3 billion from Sh47.4 billion a year earlier, representing a 29.3 per cent growth. The performance, driven by an increase in company's subscriber base from 6.1 million in 2006 to 10.2 million in 2007, comes as competition intensifies in the cellular phone market with the entry of new players.

Econet Wireless, which is partly owned by India's Essar, is set to rollout its mobile services in July, while Telkom Kenya, owned 51 per cent by France Telecom, is planning a rollout in September.

To maintain its profit momentum in the face of the competition, Safaricom is planning to widen its footprint in the under-served rural areas to boost its national coverage.

The Monitor