Kenya’s Safaricom will pay out Sh18.8 billion ($216 million) in dividend following a 31.4 percent increase in net profit for the year ended March.
The East African country’s largest telecoms company also set a new earnings record with the posting of Sh23 billion ($264 million) profit after tax.
Safaricom CEO, Bob Collymore attributed increase in profit to strong growth in its non-voice business, especially mobile internet and money transfer service, M-Pesa from which Safaricom got a 22 percent increase in revenue to close at Sh26.6 billion ($305 million) in the year ended March 31, 2014.
The massive dividend payout will benefit Vodafone Safaricom’s parent firm whose 40 percent stake guarantees it Sh7.5 billion ($86 million).
In addition, Vodafone will pocket Sh4 billion ($46 million) as service fees for its proprietary rights in M-Pesa.
Another top beneficiary is the Treasury, whose 35 percent stake would earn Sh6.5 billion ($75 million) dividend, making its investment in the Nairobi Securities Exchange (NSE)-listed company one of the most successful public investments in recent times.
Retail investors will also smile to the bank, with a 51 percent increase in dividend payment from 2013’s Sh0.31 ($0.004) to Sh0.47 ($0.005) on each share in the largest dividend payout ever in NSE’s history.
Investors in Safaricom have more than massive dividend payout to be happy about as share price has increased lately and there are indications it will continue rising.
The company’s share price increased to Sh12.9 ($0.18) in the last six months, indicating a 32 percent rise and almost tripling the amount most investors paid in 2008 when the firm listed its shares at Sh5 each on the NSE.
Although Standard Investment Bank (SIB) says the stock may be slightly overvalued, the investment bank concedes that the stock increase may continue.
SMS, data services and M-Pesa were Safaricom’s biggest revenue drivers in the year ended March and the growth is expected to remain steady in the near term.
The company’s revenues increased by 16.5 percent to Sh144.7 billion in the year ended March, with growth fastest in mobile internet, closing at Sh9.3 billion. Short messaging services grew by 34.1 percent to close at Sh13.6 billion. Fixed data services to corporate clients presented a 21.8 percent growth to close at Sh2.5 billion.
Collymore noted that mobile internet services present a huge growth opportunity for the company whose data services are the most consumed in Kenya, earning it Sh4.9 billion in the year ended March.
According to SIB, Safaricom’s value in future will be based on the performance of its mobile money transfer service M-Pesa.
“Our priority this year is to commercialise this service by growing the number of active merchants and making Lipa na M-Pesa the preferred electronic payment platform,” the CEO said.
The adoption of the money transfer and payment system is growing, with new players getting on board, latest of which is Kenya’s largest retail bank, Equity Bank, raising expectation of further growth.
With increasing competition in voice business threatening to dwindle fortunes, Safaricom has ensured profitability with revenue growth in its non-voice services, increasing by 25.3 percent to Sh58.4 billion.
Collymore identified mobile data as one of the key drivers of the company’s future growth. He therefore said the telecoms operator would continue increasing penetration of its 3G network just as it readies to start offering LTE (4G) as soon as the needed facilities are available.
