Safaricom Limited (Kenya) – July 2020 investor briefing call transcript

By Published On: June 13th, 2022Categories: Corporate announcement, Transcripts

Cyndia Nguli: Good morning, good afternoon or good evening, depending on where you are joining us from. Welcome to the Safaricom investor briefing with Safaricom CEO, Peter Ndegwa, Outgoing CFO, Sateesh Kamath and Interim CFO and Head of Investor Relations Ilanna Darcy. I am Cyndia Nguli, Senior Manager- Investor Relations. Peter and Sateesh will give brief opening remarks and we will turn to your questions.

I would kindly request that you submit your questions on the chat, providing your full names and the organization that you represent. I would also request that you submit your details in the Investor Brief registration link that we have provided on the chat and with that, Peter, I hand over to you. Thank you.

Peter Ndegwa: Thank you, Cyndia. Good afternoon, everyone. I hope you can hear me. I meant you to Cyndia just to confirm that you can hear, you can hear me.

Cyndia Nguli: Yes, we can hear you Peter.

Peter Ndegwa: Good afternoon, everyone and it’s great to have this call. We are looking forward to answering any questions that you might have. As we’ve said in the past, when we have had conversations with investors, as Safaricom given the current situation we are faced with during the COVID era, we are not going to be giving any guidance at this stage in terms of our results.

However, we are willing and ready to share the status of the key aspects of our business as an update to you as a group and answer any questions that you have. For those of that I have not met, Peter Ndegwa is my name, CEO fourth month now, just over my hundredth days. So clearly verses when I initially spoke to you I have a clear understanding of the business and some of the opportunities and challenges that we are dealing with. I handover to Sateesh to say a few words and we shall take it from there.

Sateesh Kamath; Thank you so much Peter, good day, ladies and gentlemen. First and foremost, I just wanted to say thank you so much for all the kind messages that I’ve received since my announcement of the new role. I have really enjoyed interactions with you over the last few years, and I will continue to be available for Safaricom through the transition phase. The good news is Peter has very modestly said that he has understood a bit of this business, to be honest he taken almost like duck to water, I have not seen many people picking up so much about this company in such a short period of time. So, in whatever its worth, I just wanted to reiterate the fact that we are very fortunate to have Peter take over the reins of the company and when he speaks I am sure you will understand and feel like he has been in the business for two years or more and nothing less. Peter, just checking with you do you want me to give a general overview or you want me to give your back to you?

Peter Ndegwa: Why don’t you go ahead with a general overview.

Sateesh Kamath: Yeah, sure, sure. Happy to do that. The general overview in terms of macro-economic situation is not any dissimilar with many of the countries. COVID specifically, we have now just over 10,000 cases, reasonably low death rates compared to what some of the other countries have seen. So, at this point of time, the pandemic is an issue, but health issue-wise still reasonably contained. And I’m saying relatively reasonably contained, the larger issue is economic, and it is manifesting in many ways. To start with tourism industry is impacted, a lot of SMEs are impacted along with the tourism industry. None of which should be a surprise for you, but I just thought I should call it out anyway. In terms of the currency and Forex, reasonably range bound, we’ve seen like a 5% volatility in currency over the last three months. Sometimes going up to 108 shillings to a dollar and then stabilizing to 104, and then moving in that range bound territory. So, no significant depreciations in the currency. I’ll speak a little bit more in detail about the line wise for what we’re seeing. So, I pack the impact for what does it mean for Safaricom till I finish one or two more overall updates. In terms of competitive space, the merger between Airtel and Telkom has been delayed and we’ve got understanding that it will be delayed a little bit more. As we always said, we are not against the merger. We are happy to have stronger competition if some of those clauses that we want are satisfied for. But we do understand that the merger is not delayed because of questions that we have raised. It is delayed because of shareholder reasons between the two companies, which they’re trying to sort out.

Moving on to another important topic. Ethiotel, sorry I meant Ethiopia, I am so sorry, don’t pick any meaning from what I said, I meant Ethiopia. So, Ethiopia process is underway. We have participated in the expression of interest stage. The current understanding of the timing is that it is more likely to get concluded towards end of the year and if there’s a bit of delay possibly towards early part of next year. In terms of expression of interests, it was interesting to see the people who have come up with the expression of interest. If you have questions there, we can speak a little later in the call.

One aligned comment there, the current version of what the government hasissued is without mobile money, however, as you know, our interests would be significantly enhanced if there’s mobile money and what we would be willing to put in down as license fee would certainly be different if there’s mobile money and lesser, if there is no mobile money.

So, we would continue to lobby in that direction. At this stage. I don’t think we will be able to give more details because it will impact our competitive bids in the days ahead.

In terms of coming back to Safaricom if I can call out the bad news first and then get into the better news. On voice, we are seeing pressure, a good amount of pressure. We’re seeing that consumer wallets are constraint and so they are really into a deal seeking mode at this point. So, we’re seeing good number of customers using, but they’re using lesser from their wallet on voice. That’s the phenomena that we’re seeing and it’s consistent between the three months that we’ve seen in the year between April, May and June. As a result, do expect voice to decline in this current year compared to the previous year. The other bad news that I want to speak about and the most significant bad news is the free P2P. The initial request from the government and the alignment with the Central Bank was for 90 days, which ended end of June. The Central Bank has asked us to extend up to December. We obviously are not happy with that recommendation and decision. We are continuing to have conversations with the Central Bank. In fact, Peter spoke to the Central Bank as late as this morning and while we are not able to tell exacts of how it will pan out what I would like to assure investors is that we are working closely with the government. So while we do appreciate that, we need to be supporting the country in some form or other over the next few days. The next six months we find is on the higher side, possibly in a safer environment, I would call it excesses. So, we’re working on it at this stage, given the negotiations and conversations are happening, I would pause there and say, we would give you a more accurate update when we have one. At this point of time, we are working with the government on that, Peter would you like to add anything there before I go ahead?

Peter Ndegwa: Just to re-echo what Sateesh has said, at this stage, I would say, we are working closely with the central bank and we are not able to say anything until those discussions concluded. I wouldn’t look at the issue either way but just to say that currently we are working with the central bank to see the best position that we can end up wi