[lbo-talk] Kenya's Safaricom Sees 4-5 Mln Subscribers by 2007

[uvj at vsnl.com]

Reuters.com

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.

© Reuters 2005. All Rights Reserved.