Kenya's Safaricom Sees 4-5 Mln Subscribers by 2007
Fri Oct 28, 2005
By George Obulutsa
NAIROBI (Reuters) - Safaricom, Kenya's biggest mobile phone firm, sees its subscriber base rising to 4 million or 5 million by 2007, the operator said on Friday.
The company, 40 percent owned by British mobile operator Vodafone (VOD.L: Quote, Profile, Research) and the rest by state-run Telkom Kenya, currently has just over 3 million subscribers in Kenya, east Africa's largest economy.
"I foresee that we will have 4 to 5 million subscribers in the next two years. I think our profit will also start to flatten out because there is a lot of competition, and we have to fight for it," Michael Joseph, Safaricom's chief executive, told Reuters in an interview.
Safaricom's target when it began trading in 2000 was 3 million subscribers by 2020, but by October 2004 it already had 2 million out of a total Kenyan population of 32 million.
Safaricom recorded a 42.7 percent rise in annual revenues to 26.91 billion shillings ($365.6 million) in the year ended March 31. Net profit surged 69.8 percent to 5.86 billion.
Joseph said the company's investment in the network was solely funded from internal cash flows and local borrowing, and none from its parent company, Vodafone.
"The success of Safaricom, to a large extent, has got to do with what we have done locally," he said.
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The success of Kenya's mobile phone industry has led to a sharp rise in the number of support businesses that sell mobile airtime cards and operate community mobile payphones, giving employment to many poor rural Kenyans.
The only other mobile firm operating in Kenya, Celtel Kenya, has about 1.6 million active mobile users.
Joseph also said that he foresaw the cost of international calls on Safaricom dropping by 80 percent if the company could operate its own international calling gateway.
That would give Safaricom the chance to negotiate its own rates with international phone service providers and improve the quality of service, he said.
"If we had our own gateway license, we could definitely lower the costs of international calls by something up to 80 percent," Joseph said.
An off-peak call outside east Africa costs about 56.30 Kenya shillings ($0.765) per minute, according to Safaricom.
Vodafone, the world's largest operator by revenue, has offered $100 million to raise its 40 percent stake in Safaricom to 51 percent, saying a controlling stake would make it easier for the company to borrow to fund further expansion.
"The only comment I can make is that to date the government has not come back to respond to this offer," Joseph said.
The Safaricom CEO also said the company had no plans for a local share listing and that its two shareholders had not raised the matter.
"There has been no discussion of this among the shareholders. It would be a wonderful thing of course, but it's not a management decision," he said.
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