Where is Safaricom getting the huge profits from?

Written by
  • 6 years ago
  • Posted: November 6, 2013 at 12:00 pm

Safaricom has reported increased profits for the half year compared to the same period last year. The pre-tax profit stands at Kshs 15.9 billion up from Kshs 11.5 billion reported last year. This led to 45% increase in net profits to Kshs 11.3 billion. If the trend remains the same we can expect annual profits to be at Kshs 32 billion, breaking the previous record.

The summary of the Key Performance Indicators are as in the table below.

Table courtesy of Daily Nation

As a layman I am wondering though, 45% increase in net profits at only 17% increase in revenue does not make a lot of sense especially when Safaricom is experiencing 18% increase in operational expenditure. I’m not aware of any price increase on voice, M-PESA, data or text messages over the past six months so I don’t understand where the increased profit margins could be coming from.

A commenter, on Daily Nation, expressed his views thus, “I think it is outright impossible for an established company like Safaricom Ltd to have such a huge increase in profits unless they are doing something illegal and or unethical like stealing from their customers or performing some creative accounting. For a start up that has experienced a breakthrough, maybe….but for corporate the size of Safaricom, some thorough auditing needs to be redone.”

A possible source for the Safaricom’s unrealistic profits are the numerous lotteries that they run every now and then as mentioned by another commenter, “I suspect it is the many lotteries, the Bonyeza Ushinde, Zawadi2929, Kutazama chapaa etc. These are schemes to make money from the poor who want to win the Million”. Profits from these lottery schemes are not declared.

Unethical act that Safaricom could be doing is robbing customers on data as this is the easiest to do and telecos around the world do it. Telecos perfect this robbery by disconnecting data in the middle or towards the end of a file download, but charging the download session based file size that was being downloaded. E.g. if your file size is 500MB, you download it to 75%, data disconnects, then that session is charged at at the price of 500MB instead of 375MB. Uploads are similar as incomplete uploads will always report an error message but the charges apply to the file size. By the way Data providers should be penalized for such data disconnections. Even if they were to charge only the 375MB that you managed to “download”, that data is useless as files are only functional on their entirety. Regulators should implement a system where data is charged after the download is complete.

So yeah, Safaricom could be employing some robbery antics to make the billions of profits it reports year in year out.

What is your opinion on the topic?
Odipo Riaga
Managing Editor at KachTech Analytics Ltd
Film Director, Tech and Business Blogger, Chess Player, and Photographer. God is Science.
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