Q1 was a solid quarter for the Sub-Saharan African operators, especially from a top line perspective. Airtel Africa continued to outperform peers overall. We continue to think that fundamentals for AAF and MTN are strong and deserve more attention. Valuations are compelling too.
Q3 was a decent quarter for Sub-Saharan African (SSA) operators. Fundamentals remain strong. We have updated forecasts post Q3 results, and our recommendations and target prices remain unchanged, except for Safaricom. AAF remains our preferred play in Africa.
Safaricom reported a solid set of 1HFY24 results today. Service revenue growth accelerated driven by a solid performance from M-PESA and mobile data. EBITDA growth slowed but remained robust. The Group has lifted its EBIT guidance for Kenya this year (+KHsh 12bn), it also lifted capex expectations given the KES depreciation but by a smaller degree (+KHsh 3bn). FY24 guidance for Ethiopia is unchanged, so was mid-term guidance for capex and EBITDA.
2022 was a tougher year than we expected for African Telcos & Towers. While fundamentals remained generally good, the war in Ukraine and its impact especially on fuel prices as well as other macro pressures created some strong headwinds. While some of these are perhaps inflecting, we think in many ways 2023 will remain a tough environment, with headwinds in South Africa and the Nigerian election.
Sub-Saharan African (SSA) operators continue to benefit from strong fundamentals with accelerated growth. Vodacom improved the most following the reduction in mobile money levies in Tanzania and a better DRC performance. Specific to the SSA region, we see MTN and AAF as our favoured play, while exposure to Africa is a key part of our Orange Buy thesis.
Safaricom reported its 1HFY23 results today. Service revenue growth slowed on slower M-PESA revenue during the Election Year. EBITDA declined YoY on higher M-PESA commissions and handset costs. On balance, the Group’s FY23 EBIT guidance remains intact, with the KShs 8bn downgrade in Kenyan EBIT target being offset by the KShs 8bn upgrade in its Ethiopian unit. Capex guidance remained at KShs 100-108bn. We highlight below the key takeaways from the results and the outlook.
Sub-Saharan Africa (SSA) operators saw a decent Q2 as subscriber growth remained strong. However, ARPU growth eased, in part due to the e-levies and reduced P2P fees on fintech services. Airtel Africa (AAF) was the outperformer again while MTN’s EBITDA margin was more resilient.
The Communications Authority of Kenya (CA) plans to cut the mobile termination rate (MTR) from KES0.99 to KES0.12 per minute. The MTR is the service charge a mobile network operator (MNO) pays to another MNO for terminating calls on the latter's network. For instance, for every call an Airtel Kenya user makes to a Safaricom user, Airtel Kenya must pay Safaricom KES0.99 per minute (or KES0.12 per minute under the proposed change). The new rate was supposed to become effective on 1 January, but...
Safaricom's total revenue grew by 18% yoy, primarily driven by M-Pesa's revenue growth of 45%. In turn, this was driven by an increase in transfer revenue – as charging on transactions resumed, growth in volumes outweighed the reduction in transaction fees. EPS grew by 12% to KES0.92. The result is better than our expectations, and we expect H2 22 to be strong as well. However, we remain conscious of the low base effect from H1 21. M-PESA REGAINS MOMENTUM M-Pesa's revenue grew by 45.8% yoy to...
Safaricom has reported a very strong set of results. In particular, growth rates have benefitted significantly from easier comps when P2P transfers were free of charge through the pandemic. The result is that m-Pesa revenues grew 46% y/y, which given it makes up 38% of revenues drove overall service revenue up 17% y/y.
GOOD STORY TURNED SOUR The telecoms opportunity in Ethiopia is huge, but the civil war has escalated, bringing with it heightened risk, damages, and killings. An unconfirmed press report said that Safaricom has evacuated some of its staff from Ethiopia. Other counties including the United States, Denmark and Italy have also advised their citizens to evacuate the country. The Safaricom-led consortium won the only telecom license that has been issued in Ethiopia this year after it bid US$850mn,...
On the back of the current hearings by Kenya’s Senate Committee on Information and Communications Technology, we take a closer look at MPesa’s role in boosting financial inclusion, and at the firm’s pricing. Airtel Kenya and Telkom Kenya have both argued that the market leader is abusing its dominant position, and have asked for price cuts to be imposed. We find some merit in this assertion but think discriminatory pricing is not the key driver of the firm’s success. MPESA HAS CATALYSED A BIG...
The value of Safaricom’s Fuliza (an M-Pesa overdraft facility) borrowings increased 25% yoy in H1 21, according to media reports. WHAT IS FULIZA? In partnership with Kenya lenders, NCBA and KCB Bank, Safaricom operates an overdraft facility dubbed ‘Fuliza’, a product that enables customers to access an unsecured line of credit by overdrawing on M-PESA to cover short-term cash-flow shortfalls, subject to an applicable pre-determined limit. Fuliza is underwritten by Kenyan lenders, NCBA and KC...
Following the underwhelming interest and lower-than-expected bid size during the first licence bidding process, the Ethiopian authorities have announced that the second telecom licence (which is about to be reopened for bidding) will include a mobile financial services licence. As such, the licence granted to the Safaricom-led consortium – the Global Partnership for Ethiopia (GPE) – will be upgraded to permit the operation of mobile financial services. The development is welcome as we previou...
Full Article at IIR has reaffirmed its Recommended rating for PIA after undertaking a review post the appointment of a new Portfolio Manager, Harding Loevner. The full report can be found on the IIR website. On 26 July 2021, Pengana International Equities Limited (PIA) announced a fully franked dividend of 1.35 cents per share for the June quarter. This represents an 8% increase on the March quarter dividend and takes the total dividends declared for FY21 of 5.1 cents per share, fully franked....
We recently held an investor call with the ex-CEO of Ooredoo Myanmar to discuss his experience of rolling out a greenfield business in the country. The challenges and opportunities are likely to be somewhat similar to what Safaricom/Vodacom could face as they rollout in Ethiopia in coming months.
Excitement filled the air after the Ethiopian government announced the winner of its telecom licence auction. The share price of Safaricom has rallied by over 7% in the past 12 days as investors anticipate what the successful bid could mean for the future growth and profitability of the Kenyan telco giant. In this report, we highlight our preliminary thoughts regarding the Ethiopian opportunity. We expect further clarity when Safaricom management presents to investors next week, and may adjus...
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