As the year is heading toward a close, Safaricom, the largest Kenyan company, will be ending the year as the most profitable company in Kenya and the East African region. The telecommunications enterprise recorded approximately 2.5 billion U.S. dollars in revenue. East African Breweries and Equity Group Holdings followed, with revenues of around 921 and 758 million U.S. dollars, respectively. The companies also stood out as leaders in Kenya in terms of market capitalization. The telecommunication corporation saw its profits recover in March 2023 thanks to a surge in mobile money transactions. The company's net income rose 1.4% to 69.6 billion shillings ($597 million), while revenue rose 13% to 298 billion shillings.
The sales boost was driven by a 30% rise in Safaricom's money transfer and payments platform, M-Pesa, which is the bedrock of the company's growth across the region. M-Pesa is now used by over 30 million people in Kenya to send and receive money, pay bills, and purchase goods and services.
There are a number of reasons that made Safaricom the most profitable company in Kenya and East Africa. First, Safaricom holds a dominant position in the telecommunication market. Indeed, Safaricom has over 40 million subscribers in Kenya, giving it a market share of over 60%. This gives the company a large and loyal customer base to draw on for revenue. Safaricom can use its dominant position to charge higher prices for its services and to invest more in its network and infrastructure. Second, as was aforementioned, M-Pesa was a tremendous success as it generated a significant amount of revenue for Safaricom through transactions and other charges. Third, Safaricom is way more than a telecommunication company. It is a brand that is well-known and trusted across the East African region. And lastly, Safaricom generates revenue from a variety of sources, including mobile voice and data services, mobile money, and enterprise solutions. This diversification helps to reduce the company's risk exposure.
Safaricom has been investing heavily in expanding its network and infrastructure in Kenya and other African countries. This will help the company to capitalize on the growing demand for mobile services and mobile money across the continent.
The giant telecommunication company is listed on the Nairobi Securities Exchange (NSE) under the ticker symbol SCOM. The company has a 10.30% yield, and market capitalization of Ksh 461.56 billion, and a P/E ratio of 7.42. Each investor is paid Ksh 0.62 in dividends.
Safaricom Stock Price, YTD
Source: MarketWatch
The stock price of Safaricom has been, however, volatile this year despite the company being profitable. This is due to foreign investor sell-off. Foreign investors have been selling off Safaricom shares in recent months due to a number of factors, including rising interest rates in developed countries and concerns about the Kenyan economy. Moreover, the Kenyan telecom market is relatively mature, with Safaricom already having a dominant market share. This means that the company has limited opportunities for further growth in its domestic market. And lastly, Safaricom is facing increased competition from other telecom operators, such as Airtel and Telkom Kenya. This competition is putting pressure on Safaricom's margins and profits.
Disclaimer: This is not financial advise. If you consider investing in an African publicly-traded company or private corporation, please consult with a financial advisor.