April 29, 2020 / 9:39 AM / a month ago

Kenya's Safaricom dials up Google for million smart phone offer

NAIROBI (Reuters) - Kenya’s biggest telecoms operator Safaricom is partnering with Google to offer 1 million affordable smart phones, its chief executive said on Wednesday.

The Kenyan company, which is part-owned by South Africa’s Vodacom and Britain’s Vodafone, is ramping up its data business to offset a decline in mobile calls, where it has seen a small revenue fall due to saturation.

“Data penetration is still not at the right level. Many people don’t have smart phones,” Chief Executive Peter Ndegwa told Reuters after an online investor briefing.

Data is one of Safaricom’s fastest growing revenue lines and it hopes that increased smart phone usage will boost it further.

Customers will pay as little as 20 shillings a day for nine months, Ndegwa said, as Safaricom seeks to eventually convert about 4 million 2G and 3G-enabled phones to 4G.

“If you have an app, you can’t use it on a 2G phone,” he said, adding that Safaricom is also planning to fully cover the East African nation with its 4G network by the end of this year, to further boost the data business.

Rapid growth in the data business during the second half lifted Safaricom’s annual earnings before interest and tax 13.3%to 101.5 billion shillings ($950 million).

Revenue from mobile data, where Safaricom has been aggressively fighting for market share by offering internet bundles without expiry, rose 12.1% to 40.7 billion shillings, after recording 21% growth in the second half.

UNIT TRUST TEST

Earnings growth was also driven by the first-ever drop in operating expenses, Safaricom’s finance chief Sateesh Kamath said.

He attributed the drop to digitisation, increased efficiencies and the maximisation of the use of the assets.

Revenue from its M-Pesa financial services business, which allows users to transfer cash, make payments, borrow and save, jumped 12.6% to 84.4 billion shillings, a third of Safaricom’s service revenue.

Safaricom is testing a unit trust investment product on the platform, which will generate new revenues, the operator said, without providing more details.

It proposed a dividend of 1.40 shillings per share and said the coronavirus pandemic has made it impossible to issue guidance for the year to March 31, 2021.

Ndegwa, who became CEO this month after heading Diageo’s continental Europe business, said the uncertainty was mainly due to a lack of clarity on how long the crisis will last.

The company is foregoing about 5.5 billion shillings in revenue from M-Pesa after it removed charges on small transfers, to facilitate cashless transactions and help slow the spread of the coronavirus.

“If the crisis takes longer, we will need to support our customers even more,” he said.

($1 = 107.0500 Kenyan shillings)

Editing by Alexander Smith

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