This is despite power rationing, high inflation and a dropping ARPU  Safaricom has posted an after tax profit of Ksh. 6.63 billion (US$ 89.5 million), which experienced an upsurge by 6.7 percent from 6.22 billion (US$ 84 million) in the previous financial year. The announcement which was for the unaudited half year results for the period ended September 30th 2009 has been attributed to the increase in data revenue especially Short Message Service (SMS) and M-Pesa.  According to Michael Joseph, Chief Executive Officer, Safaricom Limited, this represents 17.7 percent of revenue, compared to 10.8 percent in the period to September 2008. “The growth has been driven by the combined effect of both broadband mobile services and M-PESA.” 

The data revenue increased by 93.6 percent to KSh. 7.2 billion (US$ 97.2 million) due to the active subscriber base that has also adopted an upward trend: “our active subscribers increased to 14.51 million, up 21.4 percent from 11.96 million in the prior period with a strong M-PESA service having 7.99 million registered users has had an increase, up 93 percent from 4.14 million users in the prior period, “said Michael Joseph. With a strong subscriber market share estimated at 77.5 percent (Source: World Cellular Information Service), Joseph said the revenue market share is now estimated at 83 percent with a turnover of KSh. 40.66 billion (US$ 550 million) , an increase of 17.8 percent in the prior year. “This has resulted in Safaricom being able to retain our market share leadership with an estimated market share of 77.5 percent which is also reflected in our churn rate of 27.6 percent, which is lower than the industry average.” As the blended Average Revenue Per User (ARPU) stood at KSh.466.50 (US$ 6.3), a 7.3 percent decrease compared to KShs 503 (US$6.7) in the prior period. Safaricom’s earnings before interest, taxes, depreciation and amortisation (EBITDA) was at KSh.16.52 billion (US$ 223 million), an increase of 10.1 percent from KShs 15.01 billion (US$ 203 million) resulting in a margin of 40.6 percent. Joseph added that the results reflected the benefits of the actions taken to adjust to the continuing difficult economic conditions encountered during the period:” The effects of the prolonged drought in the country resulting in power and water rationing and high inflation driven by food and oil prices combined to reduce the disposable income of our customers and increase our operating costs.” To further enhance the fixed data services and product offerings for the company, he noted that the company has entered into a purchase agreement for a 100 percent stake in Packet Stream Data Network Limited, a Wimax service provider, in the period. “The contract precedents are being finalized. Once completed, this will allow Safaricom the ability to effectively roll-out a national fixed data service, offering excellent quality and capacity. The data services have been tailored to meet customer needs as well as lead innovation.“ Future outlook Safaricom’s expects the market penetration to increase to 65 percent over the next four years. ”This reflects a significant opportunity for future growth where we expect to remain market leaders and maintain our leading position, “said Joseph.

With the increased levels of penetration into more rural areas where consumer disposable income is lower, it is anticipated that voice ARPU’s will continue to decline. However with internet penetration still less than 10 percent, there is significant opportunity to partially compensate for the declining voice ARPU through increased data ARPU’s. “Safaricom is well positioned to take advantage of this opportunity with the continued expansion of our existing 3G and Wimax infrastructure technologies, products and offerings which have been greatly enhanced with the landing of the submarine fibre optic cables, TEAMS Limited (in which we have a 22.5 percent shareholding) and Seacom.”  “Accessibility and the speed of related products and services have increased significantly due to the availability of much larger bandwidth and internet transfer speeds, and will reduce our dependency on costly and limited satellite capacity, “he added. The company, therefore, expects the capital expenditure to remain high over the remainder of the financial year as it continues to roll out its data infrastructure and invest in capacity, coverage and quality of network. “These investments will enable Safaricom to ensure we gain a strong share of net additions going forward and maximise on the high growth potential of the data market. We are well positioned to continue to increase shareholder value now and in the future through organic growth or further acquisitions where it makes economic sense and will continue to enhance data and other services,” he concluded.