Crackdown on betting firms eats into Safaricom's earnings - Beaking Kenya News

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Tuesday, 10 November 2020

Crackdown on betting firms eats into Safaricom's earnings


Suspension of major betting firms in Kenya eroded Safaricom’s six-month income, with the value of transactions from the segment dropping by 59.3 per cent.

The firm’s half year financial results released yesterday shows the value of transactions from betting dropped to Sh49.2 billion from Sh83 billion compared to a similar period last year.

Kenya Betting Control and Licensing Board (KBCLB) revoked licenses for SportPesa and Betin, which controlled up to 70 per cent of sport betting in the country over tax compliance and regulatory disputes.

This coupled with zero-rating of M-Pesa transactions below Sh1,000 to cushion low income earners from the effects of Covid-19 further hurt the telco.

The waiver denied the company Sh9 billion in revenue in the first six months of the year.

M-Pesa earnings dropped 14.5 percent to Sh35.9 billion from Sh42 billion over a similar period in 2019.

The drop in M-Pesa earnings, combined with other factors like drop in voice and message revenue saw half-year profit drops six per cent to Sh33 billion from Sh35.1 billion similar period last year.

Voice revenue declined 6.5 per cent during the period to Sh40.19 billion while messaging declined 6.9 per cent.

The two account for 40 per cent of the company's total revenue. 

However, the promotion of cashless system as a precautionary measure against spread of coronavirus that hit the country mid- March saw a spike in the firm’s Lipa na M-Pesa segment.

The value of customer to business transactions more than doubled to Sh1.1 trillion during the half from Sh535.7 billion. Similarly, the value of business to consumers’ transactions rose to Sh897.3 billion compared to Sh684.7 billion.

The value of business-to-business transaction also grew to Sh40.3 billion compared to Sh312.03 billion.

Revenue attributed to lending products rose 33.4 per cent, with Fuliza and M-Shwari revenue up 60.7 per cent and 23.5 per cent  respectively, indicating cash crunch in households on Covid-19 effect.

Safaricom CEO Peter Ndegwa termed the results as extraordinarily good, given the tough business environment.

“Our business has proved to be resilient despite tough operating conditions. There is no doubt that Covid-19 has dealt a huge blow to many people not just in Kenya, but across the globe,'' Ndwgwa said. 

The remote working plan adopted by employers in the face of Covid-19 resulted to increased  data revenue for Safaricom, growing by 14.1 per cent to Sh22.23 billion while home fibre revenues rose by 47.2 per cent to Sh1.64 billion. 

The firm's investment in the internet data segment saw it grow past Mwananchi Group to command the market in Kenya at 33.5 per cent.

Communications Authority (CA) latest industry report shows that Safaricom had 207,398 subscribers in the period under review while the Wananchi-owned Zuku had 201,605 or 32.5 percent of the market.

Yesterday, it announced plans to provide 100 per cent 4G-network coverage countrywide by end of this year as part of its growth strategy. 

It is also working towards deploying 5G network in the country but remained non comital on the roll out date. 

“As we go into our third decade as an organisation, we aim to create a technology business by developing new digital ecosystems in health, agriculture and education sectors as we aim to provide digital solutions for our customers,” Ndegwa said.

The positive results saw the firm's share price at the Nairobi Securities Exchange (NSE) rise by 10 cents to Sh31.25, with market experts at KCB Capital projecting it to rise to Sh33 in the long run. 

''Following the announcement, we maintain our estimated fair value at KES 33.90, and we don’t expect significant market shifts in the near term,''KCB Capital said. 

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