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M-Pesa deepens its share of Safaricom’s revenue due to audio disruption
Friday, May 12, 2023
Safaricom PLC Chairman, Adel Khawaja (C) with Safaricom PLC CEO (Chief Executive Officer), Peter Ndegwa and Safaricom PLC Chief Financial Officer, Dilip Pal, during the 2022-2023 fiscal year results announcement at the Michael Joseph Center on May 11, 2023. photo | Swimming pool
M-Pesa’s share of Safaricom’s mobile service revenue increased to 41.5% as earnings from voice and text messaging came under pressure from apps like WhatsApp.
Safaricom’s mobile services revenue in the fiscal year ending March 2023 grew 4.6 per cent to Sh282.23 billion, with M-Pesa taking Sh117.19 billion or 41.5 per cent compared to 39.9 per cent a year earlier.
M-Pesa’s recent share of mobile service revenue is the highest in telecom history and came on the back of declining voice and SMS revenue due to customers’ growing preference for Internet calling and messaging applications such as WhatsApp.
Voice and messaging – which for years were the company’s mainstay – five years ago accounted for 47.2 per cent of mobile service revenue while M-Pesa revenue was 31.2 per cent. That was when the audio revenue reached a peak of Sh95.94 billion.
Safaricom CFO Dilip Pal said on Thursday, during the announcement of financial results for the year ending March 2023, that voice and messaging are still facing competition from new technologies, hinting at the continued decline in their contribution to revenue.
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“This revenue stream is under pressure and has been under pressure for a long time. Longer term, these two revenue lines may follow a similar trend you may have seen in mature markets, Pal said. “We are very committed to ensuring that we maintain and defend our market share. We have improved our pricing over the years to ensure affordability and usability.”
M-Pesa has grown to become the largest source of revenue for the telecom company which in the review period recorded Sh92.43 billion in revenue from voice and SMS, down from Sh94.09 billion a year earlier constituting 32.9 percent of the service’s revenue.
Safaricom said M-Pesa revenue grew 8.8 percent to Sh117.19 billion, supported by higher usage and growth in fee-based transactions.
Voice revenue fell 2.6 percent to Sh81.05 billion, pushing its share of services revenue to a new low of 28.72 percent. Voice in 2016 was generating 51.1% of Safaricom’s services revenue while M-Pesa was 23.3%.
The decline in voice call revenue, combined with higher operating expenses increased provisions for expected credit losses and higher depreciation and amortization costs, led to net telecom profit falling 22.2 per cent to Sh52.48 billion from Sh67.49 billion.
Safaricom’s profit declines for the third year in a row from a peak of Sh73.66 billion in the year ending March 2020, and becomes the lowest level for the telecom company since 2017 when net profit amounted to Sh48.44 billion.
We’ve faced increasing regulatory pressure, specifically the decline in mobile termination rates. “Our customers have also had lower disposable income and are seeking greater value and a better experience with our products and services,” said Peter Ndegwa, CEO of Safaricom.
MTR, the fee that a mobile service provider charges other operators for terminating voice calls on its network, was reduced in August last year from 0.99 shillings per minute to 0.58 shillings per minute.
Safaricom’s total revenue, which includes streams such as M-Pesa, voice, SMS, mobile data, home internet and sale of mobile phones, grew 4.3 per cent to Sh310.9 billion.
It appears that M-Pesa’s share in total revenue will grow further after the telecom company announced on Thursday that it has secured approval to launch mobile money transfer services in Ethiopia. Mr. Ndegwa said the telecom company is targeting its launch before the end of June.
Operating costs were Sh74.09 billion from Sh55.2 billion, highlighting the high start-up costs in Ethiopia where the telecom company started commercial operations in October last year.
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Depreciation and amortization costs jumped from Sh39.93 billion while net financing costs were Sh7.1 billion from Sh6.4 billion in part due to the continued weakness of the shilling against the dollar and borrowing doubling from Sh20.4 billion to Sh43. 500,000,000.
Safaricom, which paid an interim dividend of Sh0.58 per share worth Sh23.24 billion, proposed to pay Sh0.62 per share worth Sh24.84 billion in the last week of July.
The final return will bring the total dividends for this year to 48.08 billion shekels, compared to 55.69 billion shekels that were paid in the previous year.
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