I would like to start by expressing my gratitude to my predecessors and colleagues for the strong performance of the Company recorded in the previous financial years. The effects of the pandemic are far-reaching, including its impact on our performance during the period. In the year under review, beyond the pandemic, the country was also grappling with the depreciation of the shilling, the introduction of a new turnover tax and the roll-back of tax relief measures.
When faced with tough challenges, our resilience came forth and enabled us to forge forward. Our strong balance sheet enables us to continue making significant and important investments in the business, to support its sustainability for the long term.
The impact of our response to COVID-19, in zero rating M-PESA transactions, weighed heavily on our performance. However, we saw gradual recovery in 2H FY21 with service revenue posting a 4.0% YoY growth from a decline of 4.8% in 1H FY21.
As digital adoption accelerates in our market, we are pleased with the commercial progress we are making on traditional telco revenue lines. In FY21, mobile data revenue grew 11.5% YoY to KShs 44.79 billion largely driven by sustained momentum in customer growth and usage. Distinct data bundle customers grew 12.4% YoY to 16.71 million, while one-month active chargeable mobile data customers increased 2.1% YoY to 20.04 million. In the year, we sustained network investment, driving 4G penetration to 94% from 77% in FY20 to meet increased demand for network capacity and evolving consumption patterns of our digital consumers. We continue to drive access to network, smartphone penetration and enhanced use cases to support mobile data performance.
In the year, we launched device financing (Lipa Mdogo Mdogo) campaign to drive smartphone penetration through offering affordable smartphones which is accessible at KShs 3,999 by qualifying customers. Active 4G devices grew 39.8% YoY to 8.5 million, while the number of data customers using more than 1GB in our network grew 31.1% YoY to 6.1 million.
While voice revenue has been under pressure in line with global trends, it remains a significant revenue contributor and has maintained good momentum this year. Voice recorded recovery in 2H FY21 declining by 2.7% YoY compared to 6.5% decline in 1H FY21. This is attributed to our Customer Value Management (CVM) propositions in the year offering personalized packages to our voice customers. This resulted in a voice traffic share of 70.9% as at 31 March 2021, in line with our strategic pillar to strengthen our core business and defend voice.
Our fixed service and wholesale transit revenue grew 6.0% YoY to KShs 9.51 billion, supported by growth in Fibre to the Home (FTTH) revenue, which increased by 49.1% YoY to KShs 3.48 billion. Our 90-day double-bandwidth offering which was made permanent in the year supported growth in fibre connections, enhanced customer experience and growth in fibre customers. Fixed enterprise revenue recorded a modest growth of 0.7% affected by the impact of office closures and customer downgrades in the year. Enterprise customers grew 56.9% YoY to 38,918k, while Average Revenue Per User (ARPU) declined 31.9% YoY, driven by migration of enterprise customers to the Fixed LTE product, which has a lower ARPU. Fixed LTE customers accounted for 54.9% of total fixed customers and grew by more than 100% YoY to 21,364k in FY21. Excluding LTE, Fixed Enterprise ARPU improved 5.3% YoY.
Earnings Before Interest and Tax (EBIT) declined 5.3% YoY to KShs 96.16 billion, outperforming FY21 guidance of between KShs 91 to 94 billion driven by the loss of revenue from the zero rating of M-PESA transactions which put pressure on our contribution margin.
Mobile money has been a key growth driver, but FY21 zero rating of M-PESA transaction fees on P2P transactions below KShs 1,000 and Lipa Na M-Pesa (LNM) transactions as well as Bank to M-PESA wallet and M-PESA wallet to Bank (B2C and C2B) transactions weighed heavily on M-PESA revenue performance. This was in collaboration with the Central Bank of Kenya to drive mobile money adoption as a measure to cushion Kenyans against the rapid transmission of the coronavirus. In addition, we also zero-rated paybill costs to health facilities across the country.
The total value of the 1.7 billion zero rated transactions amounted to KShs 4.38 trillion. Following our return to charging for the transactions in Q4 beginning January 2021, we reduced our M-PESA tariffs by up to 45% for lower value transaction bands upto KShs 7,500 and retained M-PESA Kadogo (free KShs 100 and below transactions). M-PESA wallet to bank and bank to M-PESA wallet (C2B and B2C) transactions continue to be free in FY22.
The value of M-PESA transactions increased 58.2% YoY to KShs 22.04 trillion, with zero-rated transactions accounting for 19.9% of the total value while volume of M-PESA transactions grew 29.8% YoY to 11.68 billion. M-PESA revenue declined 2.1% to KShs 82.65 billion. We are encouraged by the recovery trajectory of M-PESA revenue, growing 10.1% YoY in 2HFY21 from 14.5% decline in 1HFY21.
Velocity in the M-PESA ecosystem is an indication of significant shift in adoption of mobile money in the country, driven by the need to reduce cash handling in the economy to curb COVID-19 transmission. This is also an indication of the large opportunity to continue driving innovation in the financial services sector. In line with our strategic pillar ‘To Be a Financial Services Provider’, we remain committed to continue innovating in lending, credit, wealth management and insurance verticals subject to regulatory approvals.
The impact of zero-rating M-PESA transactions weighed heavily on the bottom line. EBIT declined 5.3% YoY to KShs 96.16 billion. Thanks to sustained operational efficiencies driven by smart procurement, digitisation and operating model transformation, we continue to observe improvement in operating expenditure (Opex), reducing Opex intensity to 17.5% (2020:18.2%).
Safaricom’s immediate focus this year was to ensure that network capacity, operations and financial services were prioritised to limit disruptions. We have taken significant steps to diversify our business as a digital technology company and sustained capital investment to meet the evolving needs of our digital consumers. These investments will fuel growth of new revenue streams in addition to our traditional business offerings. As we continue to innovate, we expect capex to continue growing but capex intensity will remain within current levels as we continue monetising our investments.
Capital expenditure in the network for FY21 amounted to KShs 34.96 billion. Of this total, 68% was spent on growth areas aimed at securing revenue for the future while 32% was spent on maintenance. We invested KShs 22.75 billion in 1H FY21, marking 25.5% YoY increase, but this reduced to KShs 12.21 billion in 2H, representing a 32.1% decline. In FY21, capex declined 3.2% YoY, with the bulk of the spend going to network expansion at a time that Kenyans needed it urgently.
The Board remains committed to investing in the business and maintaining a consistent dividend pay-out ratio.
During this year, the Board declared, for the first time, an interim dividend of KShs 0.45 per ordinary share held, amounting to KShs 18.03 billion. This was not only in recognition of our solid half-year performance, but also to support our shareholders during a tough economic time. At the next Annual General Meeting to be held on 30 July 2021, the Board will propose a final KShs 0.92 dividend per share, amounting to KShs 36.86 billion. This brings the total dividend for the year to KShs 54.89 billion, which represents KShs 1.37 per ordinary share for the year ended 31 March 2021.
As Kenya’s economy continues to bear the brunt of the pandemic, the country’s macro and operating outlook remains uncertain. The ebbs and flows of the COVID-19 pandemic will doubtlessly guide our assumptions on Kenya’s economic re-stabilisation in the forthcoming years. The key impact on our business from the pandemic that continues to guide our assumptions include how the pandemic and economic recovery on the country will play out in FY22 alongside sustained pressure on the consumer wallet and its influence on consumption patterns. In view of this, we expect EBIT to be in the range of KShs 105 to 108 billion and Capex to be in the range of KShs 40 to 43 billion.
We will continue pursuing our strategy of being a purpose-led technology company as we seek to grow the business in FY22 amidst an uncertain economic environment. Our lending products have a strong potential for growth as we provide more opportunities for customers to solve their day-to-day financial challenges.
We intend to take a more focused approach to meeting the evolving needs of medium and small businesses by expanding our range of financial and fixed data services offered to them.
M-PESA growth and contribution to financial inclusion in Kenya demonstrates that our society is rapidly going digital, offering enormous potential for growth. We continue to innovate in the financial services sector, driving financial health and empowerment amongst our customers. Subject to regulatory approvals, we intend to enhance our offering in the credit and savings sectors as well as venture into insurance and wealth management space in line with our strategic priority to drive the next financial services. M-PESA Africa, our joint venture with Vodacom, remains a key vehicle to drive financial services across our borders.
Outside of Kenya’s borders, Safaricom is preparing to roll out operations in Ethiopia following a successful bid for the operating telecommunications licence to a consortium led by Safaricom. We are in the process of setting up operations in Ethiopia, to offer the Ethiopian people a world-class network experience as well as transfer the mobile money benefits and experience learned here to that country.
I take this opportunity to thank all our stakeholders, including the Board, management and my fellow employees, who have supported us and remained resilient throughout these challenging times. At Safaricom, we have taken our purpose to heart as a living value, embedded deeply in our business ethos.
I express my immense gratitude to my colleagues, whose empathy, ownership, accountability, trust and collaboration has enabled us to meet our objectives. When I joined Safaricom, my colleagues supported me immensely throughout my induction process, while allowing me to get on with tackling daily business challenges.
Finally, I thank our shareholders for their confidence in our executive and management team during a tough economic and operating environment. Having weathered the initial storm, we will work tirelessly to uphold your trust in our business.
|Mobile data revenue*||44,793.2||40,157.5||35,868.4||36,040.0||28,987.7|
|Mobile incoming revenue*||9,470.4||8,481.8||8,525.3||7,063.4||6,916.8|
|Other mobile service revenue*||7,779.2||7,236.5||6,733.5||6,461.1||5,509.0|
|Mobile service revenue||240,844.6||242,247.2||231,666.0||217,861.9||198,867.4|
|Fixed line and wholesale transit revenue||9,507.2||8,966.9||8,101.0||6,673.4||5,241.7|
|Handset revenue and other revenue||12,316.5||10,487.8||9,448.0||8,980.4||8,699.9|
|Provision for expected credit loss (ECL) on receivables||(3,009.7)||(1,669.6)||9.6||(1,041.1)||(31.6)|
|Total operating costs||(46,034.8)||(47,559.6)||(53,590.4)||(50,660.8)||(44,927.0)|
|Earnings before interest, tax, depreciation and amortisation (EBITDA)||134,129.2||138,041.6||124,302.9||112,835.0||103,686.9|
|Depreciation, impairment and amortisation||(37,964.3)||(36,547.7)||(35,332.0)||(33,568.1)||(33,311.5)|
|Earnings before interest and tax (EBIT)||96,164.9||101,493.8||88,970.9||79,266.9||70,375.4|
|Net finance income||(2,022.4)||922.2||2,240.2||633.4||237.9|
|Share of associate and Joint Venture profit/(loss)||(507.0)||3,357.0||5.5||10.2||18.8|
|Profit before income tax||93,635.5||105,773.0||91,216.6||79,910.5||70,632.1|
|Income tax expense||(24,959.3)||(32,115.1)||(28,727.3)||(24,620.0)||(22,187.7)|
|Profit after tax||68,676.2||73,657.9||62,489.3||55,290.5||48,444.4|
|Other comprehensive income||0.0||0.0||0.0||0.0||0.0|
|Profit and total comprehensive income for the year||68,676.2||73,657.9||62,489.3||55,290.5||48,444.4|
|Earnings per share (KShs)||1.71||1.84||1.56||1.38||1.21|
|Free cash flow||64,515.6||70,273.4||43,515.0||55,387.0||63,105.0|
|Ordinary dividend (paid/proposed) (KShs’m)||58,896.2||56,091.6||50,082.0||44,071.0||38,863.0|
|Ordinary dividend per share (KShs)||1.40||1.30||1.30||1.10||1.00|
|Special dividend (paid/proposed) (KShs’m)||0.0||0.0||24,841.0||0.0||0.0|
|Special dividend per share (KShs)||0.00||0.00||0.60||0.00||0.00|
*Disclosures on Service Revenue streams (FY19 to FY17) have been reclassified to align to Group reporting needs.
Chief Finance Officer