Interview with Safaricom CFO Sateesh Kamath

On 15th Sept, Safaricom held its annual general meeting at Bomas of Kenya. The company’s shareholders approved the payment of a final dividend of 0.97, changed its name from LTD to PLC status and announced plans to open new customer care centers in Thika and Eldoret.

On the sidelines, we had a chat with Safaricom CFO Sateesh Kamath and below is our conversation.

TKWS: Effects of the ongoing politics on the company’s investment decisions. How are you mitigating the risks and how are you adjusting to them?  

Satesh Kamath: From our perspective we have shareholders that are very confident in Kenya as a longterm business. Things like elections create short term headwinds but our shareholders have a long term view of the company. As such, we have not slowed down our investments at all.

On mitigation, we look at what is right for our customers. So we worked to ensure customers have connectivity and as a good corporate citizen worked to ensure we supported this important democratic process.

TKWS: A week before & after the Aug 8th Presidential election, Safaricom said that it had suffered an estimated revenue loss of between Ksh 310.2 million to Ksh 414 million  (US$3-4 million) from its M-Pesa money transfer business due to a slowdown caused by a tense presidential vote. Do you expect the same in the re-run?

Sateesh Kamath: To be honest, it is difficult to forecast. The fact is we are part of a society and whatever happens to the society will directly and indirectly affect us.

TKWS: How do you plan to pay for the expansion plans? Rights issue, debt or tap into your free cash?

Sateesh Kamath: It’s too early to speak on this. It depends on the realities that will take place in the next few year as these opportunities unfold.  The preference would be to first fund them with the strength of the balance sheet and then naturally extend the same to borrowing.

TKWS: M-Pesa’s growth in Kenya & EA has been extraordinary and it’s has been a challenge in some countries i.e S.A. In the countries where you plan to venture into, there are already existing mobile money providers, Given that M-Pesa is a Safaricom product, and expansion would need significant financial muscle, would the costs related with this venture be incurred entirely on Safaricom or would you pursue the partnership angle?

Sateesh Kamath: The structure we plan to pursue with the expansion of M-Pesa is over the top. When you do over the top, you are basically leveraging the asset you already have on the ground. This is different from expanding into the telco space inorganically in other markets. At a very high level, our expectation is that this will not require a very huge investment. We call this off balance sheet leveraging and we don’t expect this to dramatically change the shape of the balance sheet.

TKWS: In your experience, which upcoming business segments/products within the company that have a strong growth potential and need for investments?

Sateesh Kamath: There are many ways of looking at growth one is looking at what quantum of growth is contributed by what while the other is to look at what gives you growth today and what gives you growth in the future.  For the immediate future, a lot of growth will come through M-Pesa and data, specifically mobile data.  In the long term, we are making investments today with the customer in mind and streams like Masoko, Fixed data will start to chip in going forward.

The strategy of M-Pesa interoperability do you think it could have any short term or long term impact on the company’s revenues?

One,  how we look at competition , I don’t think the right way is to look at it and compare  what business they are doing. The appropriate way to look at it is how my customers want and how close I am to servicing their need. How can we make their  lives better and efficient. That is how we are looking at mobile money interoperability. We think customers will remain with us despite what is on offer across board based on the merit of what we have to offer.

TKWS; Speak about the consistent growth and improvement of EBITDA  

In Safaricom will believe in three things that are very important for us. They include purpose, our people and the profit and we try and balance all three. Fortunately, our customers have responded well to our offerings because they see value in what we offer. As a result we have been able to grow revenue, contain costs and get EBITDA.