When I arrived at Safaricom last April as the new CEO, the country was absorbed in an unprecedented global crisis and Kenya was on the brink of its first lockdown. Fortunately, under the leadership of Michael Joseph, Safaricom had already embedded a clear strategy to transform lives through innovation in technology. This year in crisis proved to be the ideal opportunity for us to demonstrate how to lead from purpose and go beyond the ordinary and expected. I have found it immensely fulfilling to play a role in a company with the vision and resources to deliver purpose with real impact.
This year, we had the honour of serving our country and looking after our employees while continuing to invest in our business and building a network for the future. The launch of Safaricom’s 5G network and the related handset financing programme were huge milestones for the Group. Being able to offer a broader range of services to SMEs in this time of pressing need was an auspicious step towards our future as a purpose-led technology company.
Safaricom is considered by many as ‘the pride of Kenya’ and has been an East African success story for two decades. The Group’s reputation, financial stability, and resilience in the face of adversity were critical factors in our relatively sound financial results for the period. Recognising that COVID-19’s impacts were impossible to avoid, Safaricom squared up to the challenge with the understanding that our technologies would – to a large degree – underpin the resilience of Kenya’s economy and community.
Although businesses and individuals struggled to survive the effects of a global economy that appeared to be in freefall at times, we knew the ubiquitous requirement to work and study from home would help to cushion Safaricom as demand for internet and other communication services increased. Our strong market position and balance sheet enabled us not only to survive serious economic challenges but also to assist Kenyans, including our own staff, through the extraordinary months that followed.
As we celebrate 20 years of a successful business, we are evolving into a lifestyle brand for individuals and an empowering business supporter, centred on technologies being developed to fit our purpose. More than that, Safaricom is a pioneering business that blends commercial and social purpose to create magic through technology and customer obsession.
In addition to the obvious economic effect of the pandemic and competition from new entrants to our markets, the Group faced practical difficulties created by the lockdown. We were under immense time pressure to create a conducive working environment without disruption to our network and service offerings, while simultaneously needing to curb costs in response to volatile cash flow. Safaricom’s adoption of cloud services in our operational environment prior to the crisis enabled us to adapt quickly. We seized the opportunity to enhance our service levels by introducing new digital platforms for customer interaction and expanding Safaricom’s range of financial services.
By now we all know how important connectivity is in the ‘new normal’, particularly the ability to reliably and speedily access the internet. To support this need, we doubled bandwidth on our home fibre service during the crisis to assist those working and learning from home. We complemented this initiative by supporting various programmes that helped school children continue learning.
From a social perspective, people working from home are at risk from mental health challenges. We had to keep our employees closer than ever and our new virtual communication tools of engagement enabled us to continue upholding the Spirit of Safaricom, despite not sharing premises with colleagues.
Safaricom stayed ahead of competitors through superior service delivery and by introducing new products that addressed identified needs. We kept our shops open and accelerated our 4G network rollouts during the pandemic. The Group also invested in infrastructure during the period to keep the country connected and deliver on our new strategy into the future. Our hardware investments included launching products to help our customers acquire 4G devices, while partnering with global players such as Google and Facebook to offer affordable devices that would otherwise have been out of reach for most Kenyans.
As SMEs were highly impacted by the economic downturn, a key focus was on supporting SMEs by offering a business app that allows them to do more with their businesses from the comfort of their own homes, or while on the road. We are seeing significant penetration of this app since the crisis hit, which bodes well for our future engagement with the crucial SME segment.
The surge in M-PESA transactions this year demonstrated the advantages that mobile financial services have over the handling of physical cash – which many people now prefer to avoid. Within two months of the pandemic beginning, M-PESA’s average wallet size increased 20%, reflecting the trust people place in M-PESA as a brand as well as their willingness to use this new method of transacting. Mobile money is a versatile product that services individuals, businesses and government alike, with the Kenyan government utilising M-PESA to transfer money to the vulnerable, while many people sent money home to support struggling families.
Thanks to the purposeful and driven work culture we call the Spirit of Safaricom, our employees rose to the occasion in an impressive display of teamwork to achieve the kind of operational performance that distinguishes Safaricom. The key performance indicators on our positive scorecard reflect the exceptionally high employee engagement levels. Our employees are proud of their roles in supporting Kenya, despite doing so from the confines of their homes.
The pandemic and strained global economy have prompted us to undertake a major strategic review of the business. Following the Board’s approval of a new strategy built around purpose, we are now bringing our new mission to life and rolling it out across the organisation.
Safaricom’s updated strategy focuses on customer obsession, since our customers’ needs should directly shape our business. To this end, we are evolving from a telecommunications and mobile money business into a purpose-led technology company. Digital innovation and a sharpened focus on customer obsession is already lifting our all-important Net Promoter Score, which reflects how positively Safaricom customers feel towards our business.
The pandemic has cemented Safaricom’s commitment to understanding our customers so that we can deliver intuitive and transparent products that give customers more control, all wrapped up in positive experiences.
To help us realise this potential, we are revising our ways of working in pursuit of an ‘agile’ approach that brings decision-making closer to customer-facing employees and to the customers themselves. I am excited about using the agile methodology, which is tested and proven by technology companies around the globe, to deliver a truly digital service for our customers, employees and the community. We will not only transform Safaricom, but also the lives of Kenyans and our customers everywhere.
Another important aspect of our future lies in our relationships with the various regulatory bodies. Regulatory certainty is vital to broadening our financial services business, while we’re engaged in ongoing communications regarding additional spectrum for broadband.
The past year has seen Safaricom innovate under pressure in perhaps the most disadvantageous economic and social climate in several decades. The pressure to deliver improved value to our customers in this difficult climate has forced us ‘to think outside the box’. We had to find new ways to approach and solve problems.
In times of crisis, organisations with purpose should rise above commercial objectives to serve a higher purpose. Safaricom’s success over the last 20 years was the platform for delivering on our promise in a way that inspired the country as well as our employees. Purpose creates value well beyond the financial objectives, which will deliver long-term sustainability. We will not recover as a company if Kenya itself is not strong. This is the real power of shared values: looking after all stakeholders.
We endeavoured to support all our stakeholders during the pandemic by living our purpose of ‘Transforming Lives’. This was a year in which it was appropriate to place humanitarian needs ahead of commercial aims, while those very humanitarian activities boosted the Kenyan economy – a necessary precursor to the economic recovery that will enable us to pursue our commercial priorities with more vigour in FY22.
We paid a dividend to our shareholders, including government and retail shareholders, boosting the country’s economy. We supported government directly in responding to the crisis and contributed to funds indirectly as the highest taxpayer in Kenya. Safaricom helped keep network suppliers and partners in business, including our M-PESA agent network, which saw significant growth during FY21.
We partnered well with the Central Bank of Kenya and government. This enabled us to set up a call centre providing COVID-19 support and to zero-rate M-PESA transactions below KShs 1,000 for nine months, which spurred the growth of Kenya’s now-burgeoning cashless economy.
In addition to our economic contributions, we worked with regulators to solve some of the pragmatic challenges the country was facing by securing additional spectrum to support the expansion of our network infrastructure.
Underpinning all of these efforts, we kept our employees safe by putting protocols in place and providing mass COVID testing.
Safaricom’s entire business hinges on technology and innovation, but let me highlight two of our focus areas:
In an age of high connectivity, cybersecurity – keeping our customers’ data and money safe – is of critical importance. We detect and proactively prevent risks by working with partners who are leaders in this field.
Another massive trend coming down the tracks is the Internet of Things (IoT), which utilises 5G to connect hardware and our physical environment to a previously unheard-of degree of granularity. Safaricom is already deploying IoT within our own business to help manage costs and will leverage the IoT experience and skills we’re developing in-house to commence offering IoT services to large enterprises.
In summary, Safaricom has built up a sturdy platform over the last 20 years that has served our stakeholders well but, in keeping with our ‘Let’s Go Beyond’ theme, we are now looking beyond connectivity and money transfers, and beyond the geographical areas where we usually operate. We have set our sights on the health, agribusiness and education sectors as well as broadening our financial services beyond payments to benefit consumers in new ways, while still growing the high-speed internet connectivity that Kenya expects from us.
Safaricom’s priorities for the year ahead are:
- Continuing to grow our data and connectivity business. Safaricom is well on the way to achieving 100% 4G coverage and we are making good progress with our 5G and fibre networks, though we need to accelerate this penetration. We are well placed to expand our fibre infrastructure to support up to a million homes over the next five years, assisting the drive towards working and learning from home that underpins the new normal. M-PESA already contributes 6% to Kenya’s GDP and is set to grow as we convert to a cashless society, so reliable connectivity is a fundamental business driver. We are facilitating the take-up of 4G handsets and entrenching the high speed connectivity networks that will enable our customers to adopt sophisticated and next generation online services by:
Broadening our financial services offerings to customers beyond payments and credit into wealth management and insurance, subject to regulatory approval Being an empowering brand for SMEs to grow their businesses by adding value to their M-PESA app, which will be a key enabler of our future Finding ways to digitise health and education to address inequality of access Entering new geographies to share the prosperity embedded in Safaricom’s successful business model
Our engagement with certain social issues was stalled by the pandemic and we are aware that Kenya’s social and economic difficulties have not gone away. Safaricom’s challenge is to support our customers in recovering from the crisis through enabling a digital lifestyle. Our social vision is guided by the UN’s Sustainable Development Goals (SDGs), which illuminate that there is so much still to do. For example, using technology to facilitate access to education, healthcare and solving agricultural issues would have real social and economic impact for Kenyans and in achieving SDGs.
We foresee Safaricom setting the benchmark for customer experiences in Kenya. I feel confident that we are laying the foundations, such as an agile culture, that will enable us to achieve our vision of providing exactly what our customers want in a manner that propels societies and Safaricom into a sustainable and prosperous future.
On 24 May 2021 Ethiopia’s Ministry of Finance and the Ethiopian Communications Authority (ECA) announced that the Global Partnership for Ethiopia, a telecoms consortium led by Safaricom, had been awarded the licence to operate in Ethiopia and establish a new telecoms network. Receiving this award was the culmination of a complex bid process that Safaricom and our consortium partners, including Vodacom, Vodafone, Sumitomo and CDC, had worked on for many months. We are all understandably delighted with this outcome.
The consortium has been awarded ‘Licence A’, which contains an attractive spectrum for operating a GSM business in Ethiopia in competition with Ethiotel, the state-owned and incumbent telecommunications operator. The Ethiopian Government had considered granting two new licences, but chose to grant a licence to Safaricom’s consortium and possibly award the second licence later. Our licence was awarded for an initial term of 15 years and we can apply for renewal for a further 15 years.
This licence opens the door to a fresh chapter of growth for Safaricom – and our consortium partners – in Africa’s second largest country and one of the only remaining economies that featured a single provider of GSM services. I believe that our consortium which combines expertise of Vodacom in the region, Vodafone globally, Sumitomo internationally, and CDC results in a very strong consortium that combines companies that have been successful across various markets with expertise of running both a GSM network in Kenya as well as mobile money that has proven successful in Kenya and in the region.
In Ethiopia, the consortium intends to build a top-quality mobile network that will enable Ethiopians to access a world-class array of digital services. Of course, we anticipate competition from Ethiotel, the current incumbent operator, but competition will keep us on our toes in delivering the Safaricom experience and ethos to Ethiopian users. As we are ‘transforming lives’ in Kenya through the purposes and calibre of our products, so too will Safaricom roll out services that will positively impact and uplift the livelihood of Ethiopians.
You are probably aware that Safaricom is as famed for our mobile money offering as we are for telecoms, but the initial award is for GSM only, and doesn’t include mobile money. However, on 21 May 2021 Ethiotel launched a mobile money offering, with Ethiopia’s Prime Minister indicating at its launch ceremony that the mobile money market will be opened to competition after a year as opposed to within the two to three-year period initially communicated. We hope that positive indication becomes fact in 2022, so that millions of Ethiopians can also benefit from our world-leading and proven M-PESA mobile money model. Being able to offer mobile money was an important part of our business case in deciding to serve the Ethiopian market.
The Safaricom-led consortium will establish an operating company in Ethiopia and commence operations in 2022. The operating company will replicate Safaricom’s organisational structure in Kenya and will have a CEO, an executive and a management team in place. At commencement, much of the technology and commercial skills will be provided by seconded experts, with the intention of passing these skills onto talented Ethiopians recruited for the purpose of developing a business that is truly Ethiopian.
The operating company will be a subsidiary of Safaricom, in which we will own an effective 55.67% equity shareholding. To meet the diverse needs of consortium members, this stake will be held via two intermediate subsidiary companies – the Global Partnership for Ethiopia BV and Vodafamily Ethiopia Holding Company Limited.
Our bidding consortium, the Global Partnership for Ethiopia, has paid USD 850 million to the Ethiopian Government for this licence, which comes with certain obligations, incl uding that of building a high-quality network that delivers customer value through innovation, products and services. Developing our network and value proposition will be financed through a mix of debt taken on directly by the operating company and from the consortium members. Safaricom intends to finance its share through internal funding and external borrowing. We do not anticipate this funding to have any impact on Safaricom’s dividend policy to shareholders.
While this Ethiopian licence represents a great opportunity for Safaricom to transcend national boundaries, the management team and the Board is aware that it is not without risk. The consortium’s comprehensive examination of the risks included, for example:
- Currency risk, given that Ethiopia operates exchange controls
- Economic risks common in emerging markets
- Regulatory risks stemming from the ECA’s implementation of a new regulatory framework for a liberalised and competitive environment
- Competition risk, as Ethiotel is already well established in Ethiopia
- Infrastructure risks emanating from rolling out a GSM network, although this provides the opportunity to build technological advantages into the infrastructure
The consortium also keeps a weather eye out for the political risks associated with the internal strife that afflicts Ethiopia from time to time. After considerable debate,
the consortium finally decided that identified risks are commensurate with the scale of the opportunity.
Safaricom is excited to open this new chapter. Needless to say, you will be reading and hearing far more about Safaricom in Ethiopia in the forthcoming years. I hope that
I have shared enough for you to share in my enthusiasm for the new venture. I will strive to provide shareholders with regular updates on progress in setting up the Ethiopian business in the period to launch of operations and beyond. This being a special year where we expanded into Ethiopia, I’d like to make a special appreciation to the governments of Kenya and the Federal Democratic Republic of Ethiopia. A special mention to the Prime Minister, Abiy Ahmed, and His Excellency, Uhuru Kenyatta, as well as the regulators for the support accorded to Safaricom and the consortium in our successful bid for the award of a full-service telecommunications licence.
There are many people to thank in a large company; this year perhaps more than ever.
I would first like to express my appreciation for the Board, whose unstinting and insightful support was vital during my first year as CEO. Michael Joseph, our current Chairman and previous Safaricom CEO, was a particular pillar of strength in enabling a seamless transition into the role for me and Dilip Pal, our incoming CFO.
Getting to know my fellow Safaricom employees under such unusual circumstances has been truly inspiring. I thank you from the bottom of my heart for your unwavering dedication during this crisis, even while you wrestled with your own COVID-19 related challenges.
I thank our broader stakeholder base – shareholders, community and government – who enabled us to carry on providing the services that kept Kenya functioning during this year.
Finally, I am grateful to our customers. Without you, our business would not exist. We will remain obsessed by your needs in the year ahead.