Safaricom PLC on Thursday last week reported its full-year earnings for the period ended 31st March 2022. I had the opportunity to chat with the telco’s CEO Peter Ndegwa where we talked about the earnings, progress of the Ethiopia business, the rise and future of mobile money service M-Pesa and what’s next for the company from a mergers and acquisitions perspective.
Progress of Safaricom Ethiopia
For the first time, Safaricom reported its earnings as a group including the Ethiopia business which will launch commercial operations in the course of 2022. Peter says that the first years will be used to build the infrastructure hence the higher CAPEX spend. At the same time, the CEO adds that the Ethiopian unit has hired over 300 staff with more than half being Ethiopians.
Safaricom Ethiopia has secured approvals for the development of towers, built two data centres, made the first test call, sent out the first test SMS and completed the first data session.
“We intend to launch in Ethiopia commercially during calendar 2022. We have certain obligations from a population coverage by the bid process, and we believe we will be able to achieve those coverage targets before March 2023,” says Peter Ndegwa. According to Mr Ndegwa, by the time of commercial launch, they will have800 to 1000 network coverage sites.
Network Partnership Deal with Ethio Telecom
By the end of May, Safaricom is hoping to sign a deal with Ethio Telecom to allow it access to the giant network of Ethiopian State monopoly telco.
The two companies have already agreed on the commercial terms and they are now going through the agreement process. Peter Ndegwa says this will be very important as they gear towards launch.
M-PESA in Ethiopia
At the same time, the CEO of Safaricom is very confident that by the time they do a commercial launch, they hope to get a licence for mobile financial services offer mobile money.
“The government is currently changing the law to allow us to operate mobile money and we are going to have conversations in the next couple of weeks.” says Peter Ndegwa.
Views on M-PESA Hitting close to $1 Billion in Revenues, Separating it from Telco
In the year ended March 2022, M-pesa revenues grew 30.3% year on year to Ksh 107.7 Billion on the back of a 34% growth in the total value of transactions to a record Ksh 29.5 Trillion. This is the first time in a calendar year that M-Pesa has crossed Ksh 100 Billion in revenues, closer to $1 Billion.
“For us, we believe that the connection between Safaricom and M-Pesa is very significant. You can’t operate the fintech without a GSM business.” says Peter Ndegwa when asked about the possibility of separating the fintech business from the telco business, Peter Ndegwa.
According to Peter, Safaricom is looking to grow the business side of M-Pesa and in future, they will look at potential opportunities such as offering credit in partnership with banks. This will be done once they have received regulatory approval.
Mergers and Acquisitions Activity from Safaricom
According to Peter, the story of Safaricom has been about organic growth and going forward, they will need to expand into areas that they are not comfortable with.
“We see as an enable of our growth significant resource use of more strategic skills, more M$A skills and innovation skills to make sure that we go into areas that we have not been before,” says Ndegwa.
Peter says that some of the areas they are keen on are financial services, fixed wireless, Internet of things and ICT, digital health and digital agri-culture.
Peter sees more opportunities in the financial services so that they can offer more services beyond payments.
Safaricom recently appointed former Citibank’s Managing Director and Head of Corporate Finance for Sub-Saharan Africa Michael Mutiga as its new Chief Business Development and Strategy Officer.
Mr Mutiga will be responsible for strategic partnerships, mergers and acquisitions, Safaricom’s funding strategy, and asset optimization.
READ;
Podcast; Interview with Safaricom CEO Peter Ndegwa & CFO Sateesh Kamath
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