Yesterday, telco Safaricom revealed its financials for the half year of the 2020/2021 FY.
The event, which was broadcasted online, was attended by the company’s CEO Peter Ndegwa and Acting CFO Illana Darcy who assumed the role of Sateesh Kamath that exited the company for Vodafone.
The announcement was different from what people have come to expect of the company.
Chiefly, the company’s service revenue dropped by 4.8% YoY to KES 118.41b, as well as profits before tax and interest dipped by 10.5% to KES 44,968.0m.
This was the first time the operator had registered losses following years of growing margins.
M-PESA, voice and messaging, all of which contribute a significant share for revenues, recorded a loss.
Overall, Safaricom’s net profit was KES 33 billion down from KES 35.1 billion.
The CEO cited the pandemic as the major contributor to the losses. Since March, the company was asked by the CBK to zero-rate person to person transactions of under KES 1000.
The action has since cut M-PESA’s earnings.
“This has been a tough period for businesses and our customers and we committed ourselves to walk through this journey together. During this period, we took several initiatives to support our customers and the government to pull through this pandemic,” said CEO Ndegwa.
At one time, the telco started lobbying the CBK to adjust the directive to stop abuse. It was not approved.
Safaricom was therefore forced to borrow KES 24.7 billion in the half year under review to oversee its operations as the pandemic progressed.
According to Business Daily, the loan was provided by KCB, among other lending institutions.
The loan, however, is only for a short term.
The publisher further adds that the loan has since ballooned the carrier’s debt to KES 32.7 billion.
Effectively, the credit is Safaricom’s biggest ever, following the fact that it has for a long time run operations with its own cash and remaining largely debt-free.
Had it not paid early dividends, the operator would have avoided the debt. Still, the company needed more money to invest in M-PESA and its associated services.
It has also emerged that the operator will be able to clear the loans in under one year.