Safaricom’s home market outperforms in first half on lower prices

By Duncan Miriri

NAIROBI (Reuters) -Kenya’s biggest telecoms operator Safaricom’s earnings got a lift in the first half of the financial year from a resilient home market, it said on Thursday, which offset a drop in its group core earnings.

Core earnings in the Kenya business surged 14.9% due to a reduction in the prices of its products and services. This boosted usage despite acute pressure on consumers’ disposable incomes from high living costs and tax hikes.

The shares rose more than 8% after the results, which included an upgrade to the full year earnings before interest and taxes (EBIT) guidance.

“Kenya’s performance is ahead of where we thought it will be. We believe Kenya will deliver a much higher performance,” Peter Ndegwa, Safaricom’s group chief executive officer, told Reuters after an investor briefing.

The company, which is part owned by South Africa’s Vodacom and Britain’s Vodafone, said its group EBIT slid by almost a fifth between April and September.

EBIT was dragged down by losses in Ethiopia, where it began operations last year and expects to incur peak investment losses this financial year, before breaking even in 2026.

Revenue from the M-Pesa financial services platform rose by 16.5% due to higher usage, while revenue from mobile internet services increased by 12.5%.

Safaricom said it had been containing costs by using renewable energy to power its transmission sites instead of expensive diesel.

It took a sustainability-linked loan from a consortium of four local banks in September and plans to do more green financing, including a possible green bond, said Chief Financial Officer Dilip Pal.

Safaricom posted a loss of 25 billion shillings in Ethiopia, where in 2021 it won the country’s first private telecoms license.

With around 120 million people and one of Africa’s youngest populations, Ethiopia has drawn significant interest from telecoms companies but is also an expensive operating environment.

“It is a big bet,” said Eric Musau, head of research at Nairobi-based Standard Investment Bank.

“It is a big market so the losses from there are an important concern but because they are being offset by the Kenya business, it is really pleasant for investors.”

($1 = 151.5500 Kenyan shillings)

(Reporting by Duncan Miriri; Editing by Aaron Ross and Elaine Hardcastle)