Bob is right, Kenya Inc needs five Sa­fari­coms

The Star (Kenya) - - News Business - ALY KHAN SATCHU The au­thor is a fi­nan­cial an­a­lyst.

This past week Sa­fari­com re­leased its first-half earn­ings. The cen­tral­ity of Sa­fari­com to the Nairobi Se­cu­ri­ties Ex­change is shown when you com­pare the telco’s mar­ket cap­i­tal­i­sa­tion of Sh851.39 bil­lion ($8.429 bil­lion) to the mar­ket cap of the en­tire stock ex­change at Sh2.050 tril­lion ($20.297 bil­lion). Sa­fari­com con­sti­tutes 41.52 per cent of the to­tal value of the stock ex­change. The mar­kets emit a very pure sig­nal and this is the first sig­nal to note. CEO Bob Col­ly­more has presided over a golden age for share­hold­ers. The to­tal re­turn for share­hold­ers dur­ing his ten­ure clocks +711 per cent. That re­turn surely ranks in the top per­centile world-wide. This is the sec­ond sig­nal to note.

Col­ly­more spoke of how Kenya Inc needs to pro­duce the equiv­a­lent of five Sa­fari­coms a year. He has a point. Sa­fari­com on Tues­day last week is­sued its Sus­tain­abil­ity Report which mea­sures the ‘’True Value’’ of the com­pany’s busi­ness, and it cal­cu­lates that the to­tal value Sa­fari­com cre­ated for Kenyan So­ci­ety in full-year 2016 was about Sh413.86 bil­lion (10.9 times greater than the fi­nan­cial profit the com­pany made dur­ing the same pe­riod).

Dur­ing the half-year pe­riod to Septem­ber 30, rev­enue topped Sh100­bil­lion to clock Sh102.09 bil­lion, profit be­fore tax was +30.6 per cent, while cash and cash equiv­a­lents surged +126 per cent to Sh43.02 bil­lion. I once de­scribed Sa­fari­com as a cash ma­chine and a +126 per cent surge in cash and cash equiv­a­lents con­firmed that. Non-voice rev­enue (53.4 per cent of to­tal earn­ings) over­took voice rev­enue (46.6 per cent of to­tal rev­enue) for the first time. Voice eked out a +1.1 per cent gain.

Col­ly­more said: ‘’I’ve been say­ing for four years voice is not dead. We’ve got a mil­lion peo­ple added to the pop­u­la­tion ev­ery year. We haven’t moved into the bun­dled voice thing that many Euro­peans did and wished they hadn’t (You could ar­gue that voice has con­founded ex­pec­ta­tions ex­actly be­cause of the de­mo­graphic div­i­dend).”

M-Pesa, which is ubiq­ui­tous and has helped Kenya Inc re-frame it­self as the hot-bed of mo­bile money and fi­nan­cial in­clu­sion, saw rev­enues surge +33.7 per cent to Sh25.9 bil­lion. Some of this surge was juiced by the bet­ting phe­nom­e­non, I am sure but the bot­tom-line is that M-Pesa is still in a par­a­bolic and GO-GO growth phase. Trans­ac­tion vol­umes have grown 27 per cent on a com­pounded an­nual growth rate ba­sis over five years, and clocked an eye-pop­ping Sh3.226 tril­lion for this six-month re­port­ing pe­riod. At some point, Sa­fari­com might con­sider spin­ning off M-Pesa via a sep­a­rate list­ing.

The fastest grow­ing slice of Sa­fari­com’s rev­enues re­mains mo­bile data, which ac­cel­er­ated +46.3 per cent to Sh13.4 bil­lion. To­day, there are more than 10 mil­lion smart­phones on Sa­fari­com’s net­work. Data us­age per cus­tomer per month grew +44 per cent to 231MBs year-on-year. The mo­bile data curve is en­tirely cor­re­lated to the re­cent ar­rival of the in­for­ma­tion cen­tury. The speed of the ar­rival is just breath­tak­ing.

In­ter­est­ingly when I asked Col­ly­more whether he was wor­ried by the com­pe­ti­tion, he said: “We are al­ways scan­ning the hori­zon. The com­pe­ti­tion does not keep me awake. It’s new, emerg­ing tech­nolo­gies like What­sApp that keep me awake.’’ By the way What­sApp did not dis­rupt Sa­fari­com. What hap­pened is we all started send­ing pack­ets and pack­ets of data across What­sApp, juic­ing the mo­bile data curve. SMS rev­enue regis­tered a +8.1 per cent gain.

Sa­fari­com is an out­lier (in sta­tis­tics, an out­lier is an ob­ser­va­tion point that is dis­tant from other ob­ser­va­tions). It’s cen­tral­ity to the se­cu­ri­ties ex­change and Kenya Inc can­not be gain­said. From the early days of the ‘Simu ya Jamii’ through to the Sh5 scratch­card, through a pro­posed roll­out of up to 1,000 4G base sta­tions over the next few months, they have trans­formed lives, con­nected us to each other, helped Kenyans meet their daily needs (M-Pesa) and to the 21st cen­tury.

To­day, Sa­fari­com is on the radar of ev­ery in­ter­na­tional in­vestor. I can­not think of any other sub-Sa­ha­ran Africa eq­uity which oc­cu­pies the same de­gree of mind share.

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