SAFARICOM PROFIT GOES UP BY 64 PERCENT

Mergers, Acquisitions and Financial Results

Safaricom made a Sh8.4 billion profit before tax for the year ending March 31, compared with Sh5.13 billion the previous year.

The growth was 64.62 per cent against that for the year ending March 31, 2004. It was made on the back of a 64-per cent increase in subscription, which has hit over 2.5 million. The company's turnover went up by 42.7 per cent to reach 26.9 billion from Sh18.86 billion in the previous year.

The percentage increase in turnover was less than the increase in subscribers, largely due to the fact that new subscribers always tend to spend less than existing ones.

The revenue was mainly generated from sale of airtime services, while revenue from selling handsets declined to Sh540 million from Sh759 million in the previous year. Shareholders' funds have increased to Sh15.34 billion from Sh9.41 billion.

Chief financial officer, Les Baille, said the decline was due to the falling handsets price and the increasing sales by dealers who now purchase their handsets directly from other suppliers.

Chief executive officer, Michael Joseph, said pre-paid sales continued to be a predominant service, although the post-paid customer base had doubled. "Our post-pay customers tend to be our higher spenders, and their ARPU, [average revenue per user], has remained high, as these subscribers increase their usage of our new services, particularly data," said Mr Joseph.

The firm will spend Sh14.7 billion to improve services. Its total expenditure in switches, base stations, billing systems and other support systems stands at Sh38 billion.

The firm put up 143 additional base stations, including five satellite sites and 14 satellite stations, bringing the total to 550 at the end of the year. Thirty per cent of the additional base stations were to increase coverage in areas such as Gatundu, North and South Kinangop, Nyanza, Kericho South and Kisii South.

Mr Joseph said that to cater for growth in the next six to twelve months, the company had commissioned three switches since April, 2004, to make it nine switches that are fully operational.

Safaricom coverage has expanded over the last year and now stands at 74 per cent of the population. The company launched a data service that allows post-pay customers to access internet and their office system while on the move and away from their desks.

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