Kenya's largest telecommunications provider Safaricom registered a 32.4 per cent increase in net income and a profit of KES 23.9 billion (US$235 million) in its half-year results released last week for the period ending September 2016.
Total revenues in the period reached KES 98 billion (US$964 million), with M-Pesa, data and other non-voice services accounting for up to KES 52.3 billion (US$511 million) compared, to KES 45.7 billion (US$449 million) from voice services. This means that for the first time in the company's history, non-voice services brought in more revenue than voice services.
This shift was largely driven by M-Pesa revenues, up 22% from the previous half-year to KES 25.8 billion (US$253 million), and mobile data, up 68% to KES 13.4 billion (US$131 million). In total, non-voice revenue – mobile money, data and smartphone sales – registered a growth 31.7%, compared to 1.1% growth in voice revenue.
Messaging revenue grew by 8.1 percent to Ksh. 8.6 billion (US$8.4 million), accounting for up to 8.8 percent of service revenues. This was largely driven by an increase in the number of 30-day active SMS users and an increase in SMS bundle and premium SMS service users.
Data is Safaricom's fastest-growing non-voice revenue stream, and CEO Bob Collymore affirmed that the company will focus on increasing speed and reliability of connections on the network through the launch of more 4G LTE sites and offering affordable smart devices to capitalise on this. The company is also mulling a move into the fiber to the home market, which is currently dominated by Wananchi Online's Zuku and Jamii Telecom's Faiba.
The company also announced that transfers of less than KES 100 (US$0.98) on the M-Pesa mobile money service will be free of charge.
We will continue with our fiber rollout to homes that will enable us to offer high-speed internet and data. Safaricom has also reviewed its M-Pesa charges to attract small businessmen and micro-agents, under the new prices, person-to-person transfers and Lipa Na M-Pesa of values of Ksh.100 and below will be free of charge. Bob Collymore, Safaricom CEO
This is how the non-voice revenues were broken down:
M-Pesa revenues recorded a growth of 33.9 percent to Ksh. 25.9 Billion by 12.2 percent increase in 30-day active M-Pesa customers to 17.6 million and a 38.4 percent growth in monthly usage per customer to 9.3 transactions per month.
The Lipa Na M-Pesa merchant service has also been critical in allowing the growth of M-Pesa with over 50,000 monthly active merchants on their service. Safaricom did not, however, state the amounts these merchants transacted in the given period. Overall, KES 3.2 trillion (US$31 billion) was transacted on M-Pesa, up from KES 2.5 trillion (US$24 billion) in the previous half-year.
Safaricom made 13.4 billion shillings from mobile data, up 46.3% from the previous half-year period. Average revenue per user and number of active data customers were also up. Monthly active 30-day data bundle users grew by 13.7% to 14.9 million customers.
Safaricom introduced flexible data bundles, which saw the number of bundle users grow by 38.5% to 7.4 million. Fixed data, on the other hand, contributed Ksh. 2.4 billion (us$23 million) in revenue, with the number set to rise as the firm looks to increase its fiber to the home outlay.
Safaricom made 4 billion shillings (US$39 million) from the sale of handsets during the first half of the financial year. These sales are mainly conducted through branded Safaricom shops, where customers can get discounted handsets, and also redeem Bonga points from the company's loyalty programme in exchange for phones. There are currently 10 Million smartphone users on the network.
Non-voice revenue will likely keep growing, especially given the convenience and lower cost of doing business as the market grows. M-Pesa has come to dominate the mobile money segment, and payment services have been introduced through Lipa Na M-Pesa to capitalise on this.
According to the statistics for April to June 2016 from the Communication Authority of Kenya (CAK), there are 21.6 million internet and data subscriptions in Kenya, up from 19.9 million in the same period in 2015.The number of internet users grew to 31.9 million from 29.6 million in 2015. Consequently, internet penetration in Kenya is at 74.2 per 100 inhabitants up from 69.0 per 100 inhabitants recorded in 2015.
The increased data use is in part linked to cheaper data bundles, as well as the emergence of Over-The-Top (OTT) services. As instant messaging and voice calls through apps such as Skype and Viber grow in popularity, voice services are taking a beating. In response to this, Safaricom has introduced free SMS bundles, giving customers the same number of SMS as the size of the data bundles they subscribe to. For example, subscribing to the 150MBs for KES 50 bundle gets you 150 SMS for free.
Going forward, non-voice revenue will take an increasingly important position in driving Safaricom's growth, a shift that will likely be mirrored by other players in the telco sector.