Kenya’s Safaricom expects earnings to rise after financial market analysts at Standard Investment Bank upgraded their recommendation of the mobile service provider from a ‘hold’ to a ‘buy’ – which will work in their favour.
Analysts at SIB have predicted that Safaricom will see a very profitable year ahead as call tarrifs have risen dramatically since last year, and the bank does not foresee Mobile Termination Rates hampering Safaricom’s business model too much.
“Our estimates assume an MTR cut to Sh1.44 combined with higher calling tariffs of Sh3.45 average up from an estimate of Sh3.25 in the previous year, the MTR cut yet to materialize thus far,” SIB said in a statement.
With those figures, SIB estimates Safaricom’s revenue to be upwards of 9.1 per cent to Sh120.4billion, and also revised the fair value of the share upwards to Sh4.62, up 17 per cent of the current share price.
“In our previous report at the end of 2011, we had assumed minutes of use will reduce far more severely following the tariff increase in October 2011, which hasn’t been the case,” SIB added, saying that they also expect voice services to make up the bulk of revenue growth at 63.3 per cent and M-Pesa to account 24.7 per cent.
Safaricom also announced earlier that it will be investing a further Sh25 billion into the Kenyan mobile service market, which will pave the way for expansion in this financial year.
Charlie Fripp – Consumer Tech editor