Safaricom Exceeds Earnings Expectations, Powered by M-Pesa and Data

At their Nairobi headquarters today, Kenya communications company, Safaricom announced another record year with the release of the Safaricom 2017 results, which CEO Bob Collymore credited to a focus on customers, innovative products and improving operations.

The company reported revenue of Kshs 204 billion (~$2 billion), an increase of 15% from the year before, and an astounding EBITDA of Kshs 103 billion ($1 billion), up from 83 billion in 2016. M-Pesa growth was 33% to Kshs 55 billion as the number of active M-Pesa customers increased to 19 million – who do an average of 10 transactions a month. The number of customers also went up 12% to 28.1 million.

Later, their CFO said the results came even as customers enjoyed lower costs of voice calls, SMS and money payments. Under “M-Pesa” Kadogo, the company waived M-Pesa tariffs for payments below Kshs 100 ($1) in a push to drive financial inclusion and this led to an 88% growth in transactions in that band.

Chairman Nicholas Nganga said that “Sustaining this growth is key to the Board” as he announced that the contract of Bob Collymore had been extended for an additional two years. Collymore, in turn, said that at a time when several Kenyan companies were announcing job losses, Safaricom had added 500 new jobs during the year and would be adding another 270 mainly in customer care.

Going forward, Safaricom will be changing their earning outlook from projecting EBITDA to projecting EBIT (earnings before interest & taxes) – and for 2018 they project EBIT to be between Kshs 71 to 75 billion after capital expenditure of between Kshs 35 and 38 billion that will be spent in 2017/18.

Following the release of the Safaricom 2017 results, their shareholders will get a dividend of Kshs 0.97 per share, equal to 80% of the profit, is an increase of 27% from 2016 – excluding the one-time bonus dividend paid out last year. The payment will total Kshs 38.8 billion, and 35% of that goes to the Kenya government as the second largest shareholder after Vodafone.

Bond Moment: M-Akiba, EABL and other NSE Bonds

Update on NSE Bonds or bonds listed at the Nairobi Securities Exchanges and other bonds, since the last bond moment in May 2015 http://bankelele.co.ke/2015/05/bond-moment-may-2015.html.

Globally, the bond market is bigger than equities one, and according to the latest CMA Kenya quarterly statistics (PDF),  bond market turnover in Kenya has been larger than the equities one since 2009 mainly due to government bonds. In 2016, equity market turnover was Kshs 147 billion (down from 209 billion) in 2015. Bond market turnover was Kshs 433 billion (~$4.2 billion) in 2016 (up from 305 billion in 2015). Turnover has been 99% due to government treasury bonds, while that of corporates is less than 1% of bond turnover in a year – except in the years 2010 and 2011.

If one doesn’t want to buy NSE bonds directly, there are CMA-approved bond funds for investors including the Apollo Bond Fund, Co-op Bond Fund, Diaspora Bond Fund, Dyer & Blair Bond Fund, ICEA Bond Fund, Madison Asset Bond Fund, and the Old Mutual Bond Fund. These fixed income /bond funds total Kshs 1.4 billion (or 2.5% of the 57 billion) of funds management by fund managers in Kenya.

Government Bonds

  • M-Akiba: Following the successful launch of M-Akiba, Kenya’s Kshs 150 million , 10%, tax-free, 3 year bonds that were entirely sold via mobile phone (the minimum investment was Kshs 3,000 (~$30))  another Kshs 4.85 billion (~$47 million) is to be floated in June 2017.
  • Following the launch of a green bonds program, banks, under the ambit of the Kenya Bankers Association (KBA), have partnered with Nairobi Securities Exchange (NSE) towards raising the country’s first bank-supported climate change-aligned corporate debt instruments in the next six to eight months. The capital flows from the green bonds in Kenya will go towards funding bank clients that require finance for clean and sustainable development projects in the priority areas of energy, agriculture, transport, infrastructure, building and urban planning, and water and waste management…so far, banks operating in South Africa and Morocco are already tapping the green finance opportunities in partnership with local municipalities and development finance institutions. projects. Also in South Africa, the World Bank’s International Finance Corp (IFC) successfully raised a 9-year, 1 billion Rand Green Bond via the Johannesburg Stock Exchange. More on the Kenya Bankers Association Sustainable Finance Initiative.
  • The Kenya Government finance bill 2017 will give Islamic finance bonds the same treatment as conventional bonds and also allow Islamic finance products in the cooperatives sub-sector.
  • The Rwanda government is about to issue a 10 billion Rwanda franc (~$12 million), 7-year Treasury bond. It will be issued on May 24 and the funds will be used for infrastructure project and capital markets development. The bonds will be listed at the Rwanda stock exchange and trade in multiple of 100,000 francs (~$120).
  • Nigeria has asked Goldman Sachs & Stanbic IBTC Bank to advise it on the sale of a debut “diaspora bond” targeted at Nigerians living abroad. – via @kenyanwalstreet

Corporate NSE Bonds:

  • Centum announced a Kshs 2 billion one year 14.5% note for the Two Rivers Development.
  • Cytonn is seeking advisors  for their medium term notes to raise Kshs 5 billion from the public towards the financing of Cytonn real estate’s (CRE) projects including Taraji Heights in Ruaka and The Ridge in Ridgeways.
  • On Monday EABL listed the Kshs 6 billion (~$58 million) of bonds at the Nairobi Securities Exchange (NSE) as the second and final tranche of its Kshs 11 billion shilling medium term note program that was launched in 2015. The tranche attracted bids worth Kshs 8.4 billion, representing a 41% over-subscription. The bonds maturing in March 2022 will pay an annual fixed interest of at least 14.17% and the raised funds will go towards optimising operations and restructuring the brewer’s balance sheet. “This is the first corporate bond to be listed on the bourse this year, and we are confident that its success, a subscription rate of 140.9% will open the doors for more listings in the course of this year.” said Nairobi Securities Exchange CEO Mr. Geoffrey Odundo. Citi upgraded EABL as a buy, due to its low price – seeing value even as the beer market was flat. The first half of FY17 (ended December 2016) showed decent volume growth for EABL (+5% YOY) but weak sales growth (-6%) as beer demand continued to shift from mainstream to value. EABL is doing well in spirits but struggling in beer, and Tanzania continues to present a challenge. – Citi report.
  • A South African credit-only micro-finance institution Real People Investment Holdings which issued a multi-billion bond in Kenya late 2015, has received a negative rating. Global Credit Ratings (GCR) said it had downgraded the primary and special servicer quality ratings assigned, with the outlook accorded as negative.
  • Transcentury bond holders lost 50% in a restructuring buyout deal.

Other Bonds

  • The African Development Bank had led the establishment of an African Domestic Bond Index and a $200 million African Domestic Bond Fund to deepen liquidity in local bond markets. It has also issued local currency bonds in 11 countries, including Kenya, South Africa, Egypt, Ghana, Nigeria, Botswana, and Uganda. leading the African Union in mobilizing domestic resources required to execute the Bank’s five developmental priorities dubbed the ‘High 5s’. – Light up and power Africa, Feed Africa, Industrialize Africa, Integrate Africa and Improve the quality of life for the people of Africa.
  • The Africa Finance Corporation issued a US$500 million 7 year Eurobond. The senior, unsecured Eurobond which carries a coupon of 3.875% was priced to yield 4.000% and matures in April 2024. It attracted orders of US$2.4 billion, representing about 5 times over-subscription from 231 investors. The bond will be listed on the Irish Stock Exchange. The Eurobond was distributed to investors in Europe (29%), United States (25%), United Kingdom (24%), Asia (18%) and the Middle East (4%). Citi, J.P. Morgan, MUFG and Standard Chartered Bank acted as Joint Lead Managers and Bookrunners for the U.S. dollar-denominated issue.
  • FSD Africa (Financial Sector Deepening Africa) and KfW Development Bank will invest £15.3 million (~$19.8 million or Kshs 2 billion) in the African Local Currency Bond Fund enabling it to step up its engagement with developmentally important industry sectors such as green energy and housing and take on investments in fragile and conflict-affected states. ALCBF is managed by Lion’s Head Global Partners (LHGP) Asset Management LLP.
  • Bonds, Loans & Sukuk Africa “the continent’s only Pan-African debt event” takes place on 13th & 14th March 2018, at the Cape Town International Convention Centre.

Telkom nationwide coverage across Kenya

Telkom has got extensive coverage across Kenya. For companies, Telkom Enterprise offers the best options in three different packages of data and voice products in all counties that can be tailor-made to suit any customer’s needs:

  • BVPN (business VPN) provides connectivity for large companies and is available in all the 47 counties of Kenya. BVPN can also be extended to even more remote areas using satellite and is scalable which means a company can add new locations with voice and video. This is ideal for large companies with a presence in different locations that want security and which have sensitive, encrypted data that needs to be transferred nationwide.
  • JamboNet is a dedicated access offering with fast reliable Internet for businesses that range from 1 MBPS to 150 MPBS. An online customer portal enables monitoring and reporting and the service is backed by a strict service level agreement (SLA) that aims at 99.9% uptime.  The quality of JamboNet service does not degrade as more users join on, and it comes with a firewall as a standard. JamboNet is available nationwide and there is also a wireless option to extend the service to areas that don’t have cable already
  • E@zyNet is an unlimited fixed bandwidth solution for SME customers. There are different monthly cost packages starting at an affordable price of Kshs 3,499 (~$35 per month). It is easy to start and reliable, offering high download speeds and flexibility for users.

Telkom, which has data centres and cloud storage also manages the Kenya government’s National Optic Fibre Backbone (NOFBI) – a national inland fibre optic cable network. Telkom has also invested in VSAT, satellite communications in remote areas, a terrestrial fibre optic cable network, GSM, and 4G LTE. Other products that are optional include free intra-company calls (within a local user group), wireless landline, fleet management, and County government solutions and other value-added services designed for hospitals and schools.

According to the latest Communications Authority of Kenya quarterly report (December 2016), the number of fixed fibre optic subscriptions grew by 18% during the quarter while that of fixed cable modem subscriptions increased by 2.8%. In a statement, Managing Director of the Enterprise Division at Telkom Kenya, Kris Senanu said “success for a Kenyan enterprise should be seen in the lens of reduced downtime through reliable connectivity; operational efficiency through uninterrupted connectivity; great customer service and clear communication lines with stakeholders and ultimately revenue-generating that leads to business growth.”

Using the AMIB50 ETF to track Africa Investments

A new fund offers South African investors a chance to invest in 50 large, non-South African companies that are listed on other exchanges and in other countries across Africa. The AMI Big50 ex-SA AMIB50  ETF (exchange traded fund) was launched at the Johannesburg Stock Exchange on April 20.

The ETF is promoted by investment firm – Cloud Atlas Investing and targets institutional and retail investors, offering them a way to invest away from the Rand and South Africa. The current basket of the fund is composed of Itissalat Al Maghrib (Maroc Telecom) (20.6% of the fund), Coml.Intl.Bank (Egypt) (11%), Lafargeholcim Maroc, Guaranty Trust Bank, Safaricom (4.3%), Nigerian Breweries, Tanzania Breweries, Mcb Group Ltd, Attijariwafa Bank and Delta.

In terms of countries, exposure to Morocco 28.4%, Egypt 19.3%, Nigeria 13.7% and Kenya 11%, and for sectors, the spread is banking shares 29.3%, telecom firms 27.8%, food & beverage 17.7%, and industrial ones 14.6%.

Investors need to have a brokerage or custody account in South Africa to buy the AMIB50 and the fund management fee is a total of 1.17% per year.

BAKE – Kenya Blog Awards 2017

The Bloggers Association of Kenya – BAKE Kenya Blog 2017 Awards are on again. The nominees,  in 22 different categories, were announced on April 3. Nominees include long time great reads and past winners like Moses Kemibaro, Owaahh, iHub, Mutua Matheka, Niaje, Wandia Njoya,  Mummy Tales, Mzalendo, and Graduate Farmer, with lots of interesting new blogs as well – such as Magunga, Otherwise Podcast,  Daniel Ominde, Penstrokes, and Kenyan Wall Street. The short-listed blogs came from 10,000 submissions, an increase from 4,800 the year before, and the winners will be announced on May 13 in Nairobi.

Voting runs up to May 9, and the 2017 awards are sponsored by, among others, Safaricom, The Bill & Melinda Gates Foundation, Ford, Xpose, EatOut, Vivienne Tea, and the Kenya Human Rights Commission. Please vote for Bankelele in the best business blog category.