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The East African : May 19th 2014
The EastAfrican BUSINESS MAY 17-23,2014 FOCUS WILL BE TO GROW NON-VOICE STREAM Safaricom shares hit one month low They closed the week’s t≥ading at $0.14 even as p≥ofits fo≥ the yea≥ ended Ma≥ch ≥ose by 31 pe≥ cent By CHARLES WOKABI The EastAfrican T he Safaricom share price has fallen by three per cent since last week Tuesday to reach a onemonth low despite the company’s record profits and news that it had struck an agreement with the Kenya government for additional spectrum that will enable it to build a 4G network. The company’s shares closed the week trading at Ksh12.60 ($0.14), a level last seen in April, even as the company said profits for the year ended March 2014 rose by 31 per cent to Ksh23 billion ($260 million) up from Ksh17 billion ($195 million) posted the previous year. The firm’s dividends jumped 51 per cent to an all-time high of Ksh0.47 ($0.054) compared with Ksh0.31 ($0.035) the previous year. The agreement with the govern- ment involves a trade-off where the company will build a Ksh15 billion ($172 million) security communication and surveillance system for the government and receive about half of the payment in the form of additional spectrum. Safaricom said it will increase its capital expenditure in the next financial year if it is allocated spectrum for the deployment of a fourth generation network that it hopes will boost its data business. “We will definitely adjust our capex upwards to make room for bigger investment in our data business if the spectrum is available. We are now ready to roll out LTE. This, together with innovations in our mobile money platform, MPesa, is what will drive our growth going forward,” said CEO Bob Collymore. But investment in the 4G net- work, also known as Long Term Evolution (LTE), is dependent on the whether the company is allocat- ed additional spectrum by the industry regulator, the Communications Authority of Kenya (CAK). It is unlikely that the regulator would renege on a decision endorsed by President Uhuru Kenyatta. Analysts at Sterling Capital Ltd said the company is bound to make more investments in the non-voice business with a view to diversifying its revenues. “Over the past few years, Safari- com’s revenue has been dominated by the voice segment. The firm’s management intends to grow the non-voice stream — SMS, data and M-Pesa — through investments and innovation to diversify the top line,” said Sterling Capital in a statement following the release of the firm’s annual results. Safaricom has for years struggled to develop its data business into a key driver of revenue but the low penetration of Internet-enabled smartphones has limited the uptake of the services. In the year to March 2014, non- voice services — SMS, data and MPesa — contributed 38 per cent, or Ksh52 billion ($597 million), of the company’s Ksh144.7 billion ($1.6 billion) total revenue. Voice remained the biggest contributor to the company’s earnings, standing at 60 per cent of total revenues. The CAK is expected to distrib- ute additional spectrum to local mobile operators through an auction next year following the migration from analog to digital television broadcasting systems. Allocation of more spectrum would pave the way for Safaricom to roll out a 4G network allowing its customers to enjoy faster browsing speeds at relatively lower prices. The company would also use the additional spectrum to improve the quality of its network, which has been a bone of contention with the industry regulator. Mr Collymore said the firm will An increase in smartphone users will raise data revenues. Picture: File DEPLOYING 4G NETWORK Safaricom said it will increase its capital expenditure in the next financial year if it is allocated spectrum for the deployment of a fourth generation network that it hopes will boost its data business. Allocation of more spectrum would pave the way for Safaricom to roll out a 4G network allowing its also invest in partnerships with handset manufacturers and vendors to drive the sale of Internetenabled devices at affordable rates. The growth of smartphones is important for Safaricom because customers to enjoy faster browsing speeds at relatively lower prices. The company would also use the additional spectrum to improve the quality of its network. Safaricom has for years struggled to develop its data business into a key driver of revenue. the average revenue per user (ARPU) of a smartphone user is nearly twice that of a feature phone user. Additional reporting by Peterson Thiong’o 43 Locally owned seed fi≥ms boost p≥oduction By ISAAC KHISA The EastAfrican ABOUT 80 seed companies in 16 African countries are on track to produce over 80,000 metric tonnes of certified seeds, the Alliance for a Green Revolution in Africa (AGRA) said, a project that is expected to lift millions of smallscale farmers and their families out of poverty. An AGRA report said that there are already indications that increasing access to the improved seed is helping farmers realise an increase in food production by 50 to 100 per cent out of the same amount of land. For example, 69 per cent of farmers surveyed in Kenya, 74 per cent in Nigeria, and 79 per cent in Mozambique said improved maize varieties had allowed them to double the amount of maize harvested per hectare. Similarly, 79 per cent of farmers surveyed in Ghana reported doubling rice yields, and 85 per cent of farmers surveyed in Uganda reported doubling yields from cowpeas. Seed firms Since the emergence of private seed companies in sub-Saharan Africa in the late 1990s, Tanzania has led in East Africa by having 14 local and four foreign-owned companies involved in the production of high yielding seeds compared with 10 local firms and three foreign firms in Uganda. Kenya has seven local and four foreign firms compared with only three local firms dealing in commercial seed production for farmers in Rwanda. Josephine Okot, managing director at Victoria Seeds in Uganda, told The EastAfrican that farmers in East Africa are increasingly adopting high yielding seed varieties, as the population grows. Umeme pegs $440m plan on powe≥ output ≥ise By BERNARD BUSUULWA The EastAfrican UGANDA’S POWER distributor Umeme has unveiled a $440 million investment plan designed to achieve a sharp increase in power generation starting 2018. The distributor will spend about $200 mil- lion on new distribution lines required to carry electricity generated from big dams like Karuma and Isimba, scheduled for completion in 2018. The new power lines will be supported by Umeme is banking on the completion of several big dams to increase power generation. Pic: File 13 new substations spread across the country in an effort to reduce energy losses and risks of power theft. This will bring its total investment in network reliability and load growth to around $222 million, with prepaid metering taking up $109 million. An investment expenditure of $73 million is budgeted for in the 2013-2018 period. Loss reduction projects will cost $15 mil- lion while safety projects will consume $12 million. Business efficiency initiatives will cost $9 million, according to data released by Umeme. Financing Apart from the $190 million raised last year through a syndicated loan provided by Stanbic Uganda, Stanchart Uganda and the International Finance Corporation, Umeme intends to finance its investment plan with retained earnings valued at $258 million at the end of 2013. Whereas the $1.4 billion Karuma dam project has an installed capacity of 600MW, the Isimba hydro plant has a 180MW capacity. Other pipeline projects are the Ayago hydro plant with 600MW and the Kabale peat plant with 33MW. Expansion of co-generation plants at Kakira and Kinyara sugar works is expected to yield 20MW and 30 MW respectively. The country’s electricity needs are rising as a result of high rates of urbanisation and increased investments in the manufacturing sector. Though the average power distribution costs have recorded a steady decline since 2005, Umeme executives said that increases in expenses incurred on generation and transmission operations could affect tariffs prior to the commissioning of new power stations. According to Umeme data, distribution costs stood at Ush244 ($0.09) per kilowatt hour (kWh) in 2005, but fell to Ush150 ($0.06) per kWh in 2010. These costs rose slightly to Ush160 ($0.063) per kWh in 2011 before declining to Ush111 ($0.04) at the close of 2013.
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