Safaricom Ltd., East Africa's biggest mobile operator, is bracing for competition in its key mobile-money business that helped boost first-half profit by 30 percent, Chief Executive Officer Bob Collymore said.
Bharti Airtel Ltd.'s Kenyan unit has begun rolling out a product with Equity Bank Ltd., the country's largest lender, that offers clients the ability to do financial transactions using their mobile phones. Safaricom's service, known as M-Pesa, handles transactions worth 121.3 billion shillings ($1.4 billion) a month and the product contributes about a fifth to revenue that totaled 79.3 billion shillings in the six months through September.
"We have a strategy that has been approved by the board and we will focus on growing our partnerships and not competition," Collymore said in an interview in Nairobi, the Kenyan capital. One such collaboration will enable Safaricom's M-Pesa users to receive money from MoneyGram International Inc.'s network of 345,000 locations around the world, the company announced yesterday.
Safaricom, which is 40 percent-owned by Newbury, England-based Vodafone Plc, is the largest company by market value in Kenya, East Africa's biggest economy. Shares in the Nairobi-based company have climbed 12 percent this year, underperforming an 18 percent increase in the FTSE NSE 25-Share Index.
Equity Bank has so far issued about 200,000 SIM cards to its clients as part of plans to introduce mobile-money transfer services under the brand name, Equitel. The lender is rolling out the the product with little marketing or advertising, because demand for the service is "too heavy," CEO James Mwangi said last week.
At the end of June, Safaricom had 19.8 million mobile money-transfer customers in a market with 26.6 million users, according to data from the Communications Authority of Kenya, the industry regulator. Revenue from M-Pesa in the six months through September increased 25 percent to 15.6 billion shillings, the company said yesterday.
Safaricom's net income in the six months through September climbed to 14.7 billion shillings from 11.3 billion shilling a year earlier, Collymore said. Total revenue increased 15 percent as the number of customers using Internet on smartphones and other devices rose 4.9 percent to 21.9 million.
"Our financial results continue to demonstrate our resolve to grow the business and returns to our shareholders while at the same time providing customers with quality products and services," Collymore said.
The company has invested 255 billion shillings in capital expenditure since inception 14 years ago, Chief Financial Officer John Tombleson said at a briefing in Nairobi. Capex in the 12 months through March 2015 will be increased to 32 billion shillings from the initial target of 30 billion shillings as free cash flow increased 13 percent to 15.5 billion shillings, he said.