Safaricom a Safer Bet in Market Turmoil

As businesses slow down and people’s income declines due to the ongoing pandemic, most companies expect a drop in sales and therefore reduced revenues in 2020. Kenya’s leading telecommunication company Safaricom is one such company.

A decrease in trade volumes, fee waiver on some transactions, and low remittances are expected to drag down Mpesa revenue, which contributes roughly 33% of the firm’s total revenue.

Nonetheless, analysts maintain a positive outlook on the company. A report by Citi research cites Safaricom’s dominance, strong balance sheet, and favorable conditions to weather the storm as reasons for the positive outlook.

Analysts at Citi predict that Mpesa revenue will remain flat and voice revenue will experience slow growth in the current financial year. The analysts see Ethiopia’s mobile financial services sector as a great opportunity for Safaricom if the market is opened to foreign telecommunications companies.

Citi maintains a buy recommendation for Safaricom shares. However, the research firm has revised the target price down to KSh32.80 per share from KSh35 per share.

We assume that pandemic measures will have a short-term impact on growth, and therefore, we expect growth to recover in FY22F to 9% yoy for revenue and 10.6% for earnings

Citi research