Safaricom First-Half Profit Growth Slows to 14%

(Bloomberg) --

Safaricom Plc., a unit of Vodacom Group Ltd., posted a 14% increase in net income for the six months through September as revenue growth from mobile money was hurt by a state crackdown on sports betting.

Growth of income from M-Pesa, Safaricom's mobile-money product, was limited at 18% to 41.97 billion shillings ($406.4 million) as the government tightened oversight over sports-betting companies, which rely on phone-based transactions for operations. M-Pesa accounts for 34% of revenue of Kenya's biggest company.

Kenya cancelled 27 gaming licences this year, including those of online betting companies SportPesa and Betin, which account for 85% of the gaming market share, African Alliance Securities telecoms analyst Maureen Kirigua said in July.

“Excluding gaming, M-Pesa grew at a very impressive 20.9% year-on-year, which is more impressive than the 18.9% in the previous year,” Chief Financial Officer Sateesh Kamath said.

While M-Pesa growth was held back, the performance was better than expected, according to Patrick Mumu, a research analyst at Nairobi-based Genghis Capital Ltd. Safaricom beat the investment bank's estimate of 13% after income from a mobile overdraft facility introduced in January and mobile-banking products partly compensated for the contraction in betting.

Surprise Growth

Safaricom offers mobile-banking services in partnership with NCBA Group Plc and KCB Group Ltd., two of the nation's three biggest lenders.

“The surprise is really the growth from the other M-Pesa income, the new business lines,” Mumu said.

The company reported 35.7 billion shillings in profit, compared with 31.2 billion shillings a year ago, as service revenue grew 5% to 124.3 billion shillings, slower than a year earlier. Earnings before interest and tax went up 13% to 49.8 billion shillings

Safaricom, which accounts for 51% of Nairobi Securities Exchange's market value, climbed as much as 2.5% to 30.50 shillings, the highest in 18 months. The shares have gained 37% so far this year, compared with a 28% jump of the FTSE NSE 25-Share index.

To contact the reporter on this story: Bella Genga in Nairobi at bgenga2@bloomberg.net

To contact the editors responsible for this story: David Malingha at dmalingha@bloomberg.net, Helen Nyambura

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