Kenya: Return of M-Pesa Charges Boosts Safaricom’s Profits

Safaricom recorded a 12.1 per cent net profit jump in the half year ended September, helped by revenue growth as the telco reinstated charges on M-Pesa transactions of less than Sh1,000.

The telco’s net profit in the period stood at Sh37 billion, up from Sh33 billion a year earlier.

Sales increased 17.5 per cent to Sh146.3 billion, with the mobile money platform M-Pesa leading the revenue growth.

Safaricom did not declare an interim dividend, indicating that its first mid-year payout of Sh0.45 per share made for the previous half year was a one-off.

M-Pesa, which overtook voice last year to become the single largest business line, posted the highest revenue growth of 45.8 percent to Sh52.3 billion.

“M-Pesa recorded strong performance… following the return to charging beginning of January 2021,” Safaricom said in a statement.

“M-Pesa now accounts for 37.8 per cent of service revenue, reflective of the opportunity for digital financial services to consumers and enterprise customers.”

Charges on the mobile money platform for transactions of less than Sh1,000 were suspended to offer financial relief to customers and reduce handling of cash in the wake of the Covid-19 pandemic.

Zero-rating of the transactions lasted from March 16, 2020 to December 31, 2020.

Safaricom reinstated charging at the beginning of this year but at reduced tariffs after reaching an agreement with the Central Bank of Kenya (CBK).

The telco says the removal of fees led to a surge in usage of M-Pesa, adding that the trend has persisted even after charges were reinstated.

“Velocity in the M-Pesa ecosystem and customer transacting behaviours influenced by the free fees introduced last year have sustained post return to charging,” the company said.

Safaricom plans to commence operations in Ethiopia mid next year after leading a consortium that won a licence in that market which has been served solely by the State-owned Ethio Telecom.

Safaricom’s chief executive Peter Ndegwa said the Ethiopia subsidiary could be profitable from the fifth year of operation.

He however noted that the violence in that country could impact the profitability timelines.