This archive report was first published on 11 December 2019.
Published on December 11, 2019, Safaricom's interim CEO Michael Joseph shared the company's ambitious plans for 2020 in a recent interview.
According to Citi, a Global Investment Bank and Financial Services, Safaricom expects to have countrywide 4G coverage by July 2020. The company also plans to launch a number of exciting new products around M-Pesa in the coming year.
One of the key areas of focus for Safaricom is to drive active users and the number of transactions from the average of 13 transactions a month to at least one transaction daily. The company's management expects faster growth of 'new business' as the number of use cases continues to grow.
Michael Joseph also reiterated that a number of new products are in the pipeline to be launched in early 2020. Some of these products are targeted to improve saving culture, while others aim to improve access to products used on a daily basis.
However, the cost of credit is still high, and the success of new products is difficult to predict. Despite this, Fuliza take up exceeded expectations, and Safaricom is considering a Pay-As-You-Go model to drive device and usage take up.
The company's recent simplification of tariffs with no expiry has been positively perceived by customers, and it will be difficult for competitors to match. This move is part of an overall program to improve the telco's operations, which will be done in three phases.
One of the key areas of focus for Safaricom is the Ethiopian market. The Ethiopian government is considering the sale of two licenses, and Citi says the bids structuring is likely to take the form of a competitive selection, or 'beauty contests.'
Michael Joseph expects that good political relations between Kenya and Ethiopia will play a big role in the licensing discussion. Safaricom is considering making a bid as part of a consortium of four partners, including Vodacom and two financial ones.
The note says that Safaricom is looking for a minority stake, and both Vodafone and Vodacom Group are likely to take control given their combined stakes in the deal. According to Michael, the size of Safaricom's stake will depend on the overall cost, which the company plans to fund via debt.
In case the Safaricom consortium fails to acquire licensing, the telco sees an opportunity to partner with Ethio Telecom, particularly on the provision of Mobile Financial Services.
According to Mr. Joseph, the new CEO, Peter Ndegwa, fits the bill as Safaricom CEO, except for telecom-specific criteria. Mr. Joseph intends to support the new CEO through transition and possibly for longer.
Citi has placed a Ksh 30.1 price target based on the telco's superior growth and synergies between the digital platform and telecom business. However, Citi sees some risks that could prevent Safaricom's share price from reaching the Ksh 30.1 target price or even outperform.
