Safaricom profits slip by 10% in half-year earnings

Kenya's leading mobile phone service provider, Safaricom, recently reported a 10% decline in its half-year earnings, marking a significant deviation from its usual trend of breaking profitability records in East Africa. The drop in profitability, totaling 33 billion shillings, has been attributed to a challenging economic environment and significant capital investment in the company's newest subsidiary in Ethiopia. To delve deeper into these numbers, CNBC Africa interviewed Ken Gichinga, Chief Economist at Mentor Economics, for insights into Safaricom's performance. Gichinga shed light on the potential opportunities and challenges facing Safaricom, particularly in the Ethiopian market. Despite the decline in profits, Safaricom's CEO, Peter Ndegwa, remains optimistic about the company's prospects in Ethiopia, emphasizing the untapped potential in the market. The initial revenue streams from Ethiopia, primarily driven by handset sales, indicate a promising start for Safaricom's venture in the country. With the recent rollout of 5G technology in Nairobi, Safaricom aims to bolster its innovation efforts to stay ahead in the competitive telecommunications industry. Gichinga highlighted the need for continued investment in research and development to drive future growth, noting that innovation will be a key factor in Safaricom's success. Additionally, the reduction in the overdraft facility Fuliza has raised questions about its impact on Safaricom's financial performance. While it is still early to assess the full extent of this change, Gichinga pointed out potential factors such as mobile termination rates and product cannibalization between Fuliza and other services. As Safaricom navigates through challenges and opportunities in its expansion strategy, a focus on innovation and strategic decision-making will be crucial for sustaining its market position and driving long-term growth.