Kenya - Safaricoms super profits

Telecom Investment Research Note


Vodafone’s publicly listed Kenyan unit, Safaricom has been a never ending success story of superlatives: More than 80% market share, the biggest profits any company has ever made in the entire East African region, pioneer of new services such as 3G mobile broadband, 4G (LTE) and mobile banking (M-Pesa), average revenue per user (ARPU) more than 50% above its nearest rival...

More recently, Safaricom’s market share has come off its peak under increased competition, and the company has joined a price war that it had long been able to resist, with the result that ARPU also fell sharply. However, the company must be doing more than one thing right: While its nearest competitor Zain made heavy losses for years and was eventually sold to Bharti of India last year, Safaricom stayed in the black throughout the global economic crisis, although with reduced profits for the first time. Now profits are rising again, and the rapid decline in ARPU has been stopped.

An interesting rotation between local and international, retail and institutional shareholders took place in 2010, which shows that some are sceptical while others believe the company will be able to continue on its path of success.

Table of Contents

  • 1. Synopsis
  • 2. Market statistics
  • 3. Privatisation and IPO
  • 4. Financial results
  • 5. Price war
  • 6. Mobile data revenue
  • 7. 3G
  • 8. LTE (4G)
  • 9. M-Pesa mobile banking
  • 10. Shareholder rotation and outlook
  • Table 1 – Safaricom ARPU – 2007 - 2010
  • Chart 1 – Kenya – Mobile subscribers and penetration rate – 1999-2012
  • Chart 2 – Kenya – Mobile market share by operator – September 2010

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