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November 2016
Company Update
Safaricom Limited
“Setting Trends The Techno Way”
Recommendation BUY Pegged on accelerated mobile data, sustained MPESA revenue growth and opex opti-
mization, we estimate that Safaricom will deliver a 26.9% CAGR in net earnings in
the next 3 years, translating into a forward P/E of 10.4x and ROaE of 54.1% in
FY19F. Based on this, we recommend a BUY on Safaricom with a Fair Value of
KES 22.60, r epresenting an 11.7% upside from cur rent pr ice. We fur ther high-
light our base arguments below and expound on them in the subsequent sections. Mobile data-All the way up! Based on accelerated smartphone penetration and increased adoption of data bundles,
we see mobile data ARPUs fast tracking at a 3 year CAGR of 20.8% to KES 220.64
in FY19F. Further, we estimate Safaricom’s mobile data subscribers to outpace popu-
lation growth by 7.0x for the next three years, resulting in a 58.8% and 77.1% mobile
data subscriber rate in FY17F and FY19F respectively. Mpesa– The service revenue linchpin Our forecasts suggest that MPESA will continue to be key in driving service revenue
growth, accounting for 29.6% of the same in FY19F from 26.4% in 1H17. We
estimate MPESA revenue to grow at a 3 year CAGR of 23.4% to KES 77.9B in
FY19F. Voice ARPU– Mature product? Certainly. We estimate subscriber growth to come in at a paltry 3 year CAGR of 5.3% while
effective minutes yield is set to decline at a 3 year CAGR 6.1%. Our view on sup-
pressed subscriber growth is based on limited upside for mobile penetration, recorded
at 90.0% (as of June 2016). Other discussion points: SMS contribution to falter (3 year CAGR of 7.0%) Fixed data- tough grubbing the mother lode EBITDA margin to expand as direct costs and opex growth lose momentum Equitel and the Kenyan Interbank Transaction Switch (KITS)– Are they
much of a threat? Key stats FY14 FY15 FY16 FY17E FY18F FY19F Revenue (KES B) 144.7 163.4 195.7 212.3 240.3 272.7 y/y % ch 16.4 12.9 19.8 8.5 13.2 13.5 EBITDA (KES B) 61.0 71.2 83.1 105.7 123.1 145.7 y/y % ch 23.8 16.8 16.7 27.2 16.5 18.3 EPS (KES) 0.57 0.80 0.95 1.26 1.56 1.94 y/y % ch 31.1 38.7 19.5 32.5 23.7 24.6 DPS (KES) 0.47 0.64 0.76 1.01 1.33 1.65 y/y % ch 51.7 36.2 18.8 32.7 31.4 24.6 EV/EBITDA (x) 13.2 11.8 10.0 8.2 6.9 5.7 P/E (x) 35.3 25.4 21.3 16.1 13.0 10.4 ROaE (%) 26.8 32.6 34.5 44.6 51.8 54.1 Div yield (x) 2.3 3.2 3.8 5.0 6.5 8.2 Source: Company, ApexAfrica estimates
Bloomberg Ticker : SAFCOM KN
Reuters Ticker: SCOM.NR
Share Statistics
Fair Value (KES) 22.60
Current Price (KES) 20.25
Issued shares (M) 40,065
Market cap (USD M) 8,330.3
Year end March
Free Float (%) 25.0
Foreign ownership (%) 13.0
Av daily trading vol (USD) 2,446,351
Price Return
Absolute Excess
3m 0.0% 5.3%
6m 16.7% 33.2%
12m 26.6% 43.2%
Price Trend
Source: Bloomberg
Research Analyst
Joy D’Souza
Head of Research
+254 723 420204
Nation Media Group
Nation Media Group
Topline: NMG continues to establish its substantial online
presence and extensive variety of digital content to grow rev-
enue. Its earnings from e-papers and online advertising are
projected to grow to about 10% of the company’s revenue by
2018. Estimated growth in the digital space in 2016 was
about 15% y/y. The last quarter of 2016 saw significant busi-
ness in print- increased advertising and the launch of new
products.
Attractive dividend yield: NMG cur rently trades at KES
88.00 end of KES 10.00 has been maintained for the past few
years.
Cash rich and no debt: It is wor thy to note that NMG is
cash liquid and unencumbered by debt. The new print press
of KES 2B bought earlier in March 2016 was paid in cash
upfront without any debt.
Up Coming Projects: The company is cur rently testing a
new Nation Media app that will allow users to access all sites
and publications on one platform. The app will enable NMG
to generate more revenue from online advertising. As the
elections approach, NMG’s focus will be on making signifi-
cant profits from political advertising and setting up election
websites where political parties can reach out to the citizens.
New studios: one in Eldoret, one in Kisumu and one in
Mombasa which will add to its revenue streams and attract
audiences in the region.
Nation Media Group
SMS contribution to falter Owing to cannibalization from data messaging, we see SMS
revenues growing at a slower pace (3 year CAGR of 7.0%
compared to historical 3 year CAGR of 19.5%) and conse-
quently contributing less to service revenue (7.8% in
FY19F). The anticipated growth however will be driven by
accelerated SMS volumes on account of regular promotions,
emergency top ups and the SMS bundles plan introduced by
the company in 1H17. While bundles are priced much lower
than normal SMSs (-80.0% lower), increased volumes will
ensure stability in SMS ARPU, which we forecast at a 3 year
CAGR of 1.1% to KES 59.3 in FY19F. Fixed data-tough grubbing the mother lode In FY16, Safaricom had 1,018 commercial buildings and
1,795 homes connected to its high speed fibre, quite insipid
figures in comparison to the potential that Nairobi alone of-
fers. The office and homes space remains quite competitive
with players like Liquid Telecom, Jamii Telecom, Dimen-
sion Data, Wananchi Group and Telecom kenya controlling
a substantial portion of the market. The Big Box, safaricom’s
decoder that allows users data and free to air channels failed
to gain traction, further highlighting the impregnable nature
of this space. We note that Safaricom continues to invest in fixed data with
plans underway to partner with Kenya Power to use its trans-
mission lines.
We estimate fixed data ARPU to grow at a measly 3 year
CAGR of 0.7%. However, owing to growth in subscribers,
fixed data revenue will accelerate at a 3 year CAGR of
20.3% to KES 6.7B in FY19F.
Source: Company filings, ApexAfrica estimates
Voice ARPUs– Mature product? Certainly. We estimate subscriber growth to come in at a paltry 3 year
CAGR of 5.3% while effective minutes yield is set to de-
cline at a 3 year CAGR 6.1%. As a result, voice ARPU will
decline at a 3 year CAGR of 5.1% to KES 256.7. Our view on suppressed subscriber growth is based on lim-
ited upside for mobile penetration, r ecorded at 90.0% (as
of June 2016). We have based our estimates on Safaricom’s
voice revenue performance on a stable minutes market share
of 65.0% for the next three years, assuming that at best, the
company should be able to defend its market share. A stable
market share will be sustained by Safaricom’s regional strate-
gy which saw the company record a 6.8% y/y rise in 30 day
active customers in 1H17. We expect Safaricom to increasingly carry out promotions
aimed at growing minutes of use as it fights to keep the price
sensitive subscribers in its space. Consequently, we see
minutes of use growing infinitesimally at a 3 year CAGR
of 2.0%, a pace that will not offset voice ARPU which we
estimate to decline at a 3 year CAGR of 4.3%. We also note that as mobile subscribers increasingly embrace
data calling applications, this may disrupt voice revenues
significantly in the long run (while bearing a positive impact
on data). This has however not been factored in our model as
we have no solid statistics to back this argument for now. Evidently, contribution of voice to service revenue will con-
tinue to fall going forward, which we estimate at 35.0% in
FY19F from 46.6% in 1H17.
Source: Company filings, ApexAfrica estimates
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
FY12 FY15 FY16 FY17F FY18F FY19F
Voice Mpesa Mobile dataFixed Messaging Other seviceHandset & others
0
0.02
0.04
0.06
0.08
0.1
0.12
0
50
100
150
200
250
300
350
FY14 FY15 FY16 FY17E FY18F FY19F
Voice ARPU (KES) y/y Subscriber growth
Nation Media Group
Inflationary pressures will increase in 2016 as the Rwandan
Franc (RWF) continues to depreciate against the United
States dollar (USD) and strong economic growth increases
demand pressures.
December 2016 inflation stood at 7.3%y/y up from 6% in
November. the increase was mainly driven by the continuing
increase in food and non-alcoholic beverage prices over the
reporting period. The annual average inflation rate between
December 2016 and December 2015 stands at 5.7 per cent
Interest rates
In 2016H1, money market interest rates remained stable with
slight upward trend. T-bills, repo and interbank interest rates
increased respectively to 7.29%, 3.62% and 5.93% in June
2016 from 6.76%, 2.36% and 3.73% in December 2015.
During the first six months of 2016, both lending and deposit
interest rates remained stable declining slightly to 17.2% and
7.9% respectively on average in compared to their levels
during the same period in the previous year 2015 where they
stood at 17.5% and 8.4% on average.
The deposit rates are forecast to stand at 8.6% in 2016 and
9.5% in 2017.
Fiscal policy-Budget and government borrowing
The Government of Rwanda wants to make Rwanda a mid-
dle-income country by 2020. To achieve this, they allocated
USD 1.13 billion to increasing youth employment and in-
crease productivity, a further USD 17.21 million towards
skills development, and USD 6.67 billion to the National
Employment Program.
The 2016/17 fiscal year’s (FY) budget is no different, with
total expenditure projected to increase by a marginal 3.6% to
reach RWfr1.85trn ($2.4bn). Domestic revenue is expected
to amount to 18.2% of GDP, while total grants are expected
to fall from 6.1% of
GDP in the previous fiscal year to 5.4% of GDP in 2016/17.
Current expenditure is expected to remain largely stable at
14.5% of GDP, while capital expenditure is expected to drop
from 12.6% of GDP to 11% of GDP in the 2016/17 FY. The
government has been compelled to adopt a more prudent
fiscal policy stance to reduce the country’s dependence on
donor support and increase fiscal autonomy. Recent external
headwinds have encouraged the government to ease demand
for imports by reassessing its infrastructure investment pro-
gram. This will undoubtedly have a negative impact on eco-
RWANDA
• GDP growth-expectations for 2016 and 2017 and
the drivers
Per the EIU, real GDP growth is forecast to average 6.6% in
2016/2017 driven by a combination of factors including for-
eign and public investment, services and exports. The main
challenge to face Rwandan economy in 2016-2025 period
will be the impact of debt because of falling foreign aid.
Since Rwanda is now deemed fit to transition from grant-
based financing to loan-based financing by the IMF debt lev-
els will increase gradually due to decline of foreign aid.
Rwanda’s economy expanded 5.2% y/y 3Q16 versus 5.9% y/
y in 3Q15. It was the lowest growth since 4Q13 (2.2%). On a
quarterly basis, the GDP shrank 3.7% q/q. This performance
pushed Rwanda’s GDP at current market prices to
Rwf1,662B, an increase from Rwf1,506B in the same period
of 2015. Agriculture grew 1% and contributed 0.4 bps to the
overall GDP growth, while activities in the industry sector
increased 7%. Service sector grew 6% and contributed 3% to
the overall economic growth over the third quarter of last
year. In agriculture, food crop growth was at 2%, while ex-
port crops declined by almost 13%, mainly because of a re-
duction in coffee and tea exports. However, the wholesale
and retail trade segments grew 9%, hotels and restaurants 6%
and public administration at 19% with information and com-
munication dropping 2%.
• Monetary policy-inflation and interest rates
Inflation
We expect inflation to average 5.5% in 2017 as oil prices are
expected to rise and as the RWF depreciates further. Looking
ahead, upward pressures are likely to come from high food
prices, rising costs for clothing and footwear and increasing
transport inflation.
Rwanda inflation increased by 9.1% y/y in November 2016.
The National Bank of Rwanda expects December 2016 infla-
tion to stand at 6% from 6.4% in November. The drop-in
inflation is attributed to expectation of fall in prices of fresh
products following the start of the rainy season. Inflation at
the end of 2016 is seen at 4.5%.
Though food inflation slightly reduced from 8.6% in 2015Q4
to 8.2% and 7.0% in 2016Q1 and 2016Q2 respectively, it
remained the highest contributor to headline inflation espe-
cially after the jump in vegetables inflation observed in No-
vember 2015.
Inflationary pressures will increase in 2016 as the Rwandan
Nation Media Group
•Foreign exchange-expectation on currency movement and drivers Fiscal and current-account deficits will put downward pres-sure on the Franc while monetary policy tightening in the US will lead to a strengthening of the dollar. The exchange rate is forecast to slip from an average of RWF722:USD1 in 2015 to RWF781:USD1 in 2016, before depreciating further, to RWF804:USD1, in 2017. The FRW has been quite stable for the last ten years as annu-al average depreciation stood below 5%. This stability was a result of high foreign inflows such as foreign aid and a mod-erate trade deficit. the imports bill has increased substantially since 2005 while export receipts remained relatively low, leading to the wid-ening of the trade deficit putting pressure on the Rwandan Franc. Thus, the FRW depreciated by 4.8% end June 2016 compared 3.6% recorded end June 2015 The Rwandan franc is expected to depreciate further this year because of falling commodity receipts, despite an ex-pected injection of $50 million in program support from the International Monetary Fund. no respite is expected on the currency front, with the franc, which has depreciated by 8 per cent against the greenback, projected to lose more ground against the dollar and fall by 9.8 per cent by the end of the year, In 2015, the FRW depreciated by 7.5%, the highest deprecia-tion recorded in Rwanda in last decades and in the first half of 2016, the Rwandan Franc continued to be under pressure due to low export revenues and high import demand and demand for dollars from different companies and govern-ment projects under the Public Private Partnership (PPP) framework which needs to mobilize hard currency from the domestic market. In the same period, the FRW depreciated by 9.4%, 7.8%, 5.5% and 6.7% against EURO, the Kenyan shilling, the Tan-zanian shilling and the Ugandan shilling respectively, while it appreciated by 2.0% versus the Burundian franc and by 7.0% versus the GBP.
The benefits of lower donor dependence and improved mac-
roeconomic stability should outweigh the costs related to
lower growth over the short term.
Turning to external balances, Rwanda’s wide merchandise
trade deficit is expected to maintain a shortfall in the overall
current account going forward. The country’s merchandise
trade deficit is expected to remain between 14% of GDP and
15% of GDP over the 2015-17 period before commencing a
narrowing trend. Consequently, the current account deficit is
expected to remain wide over the medium term, fluctuating
between 12% of GDP and 13% of GDP, before commencing
a narrowing trend by the end of the forecast period. The fis-
cal challenge in Rwanda is the end of being given grants.
They will now fully be reliant on borrowing.
• Balance of payment-current account deficit
Under a $204 million facility agreed in June, Rwanda re-
ceived $100 million from the IMF, improving its capacity to
import from 3.6 months in December 2015, to 3.8 months in
September. We got the facility, and that is why our reserves
remain comfortable. Today, we are at around 3.8 months of
import cover, and, with further disbursement of $50 million
before the end of the year, we expect the reserves to cover
4.3 months of imports,” said John Rwangombwa, Governor
of the National Bank of Rwanda.
During the first six months of this year, the country recorded
a 5.1 per cent rise in the trade deficit, from $858.98 million
in the same period last year to $902.69 million.
On the external sector, Rwanda’s trade deficit widened by
5.1% in the first half of 2016, from USD 858.98 million to
USD 902.69 million, as formal imports grew by 3.3% in val-
ue while formal exports value contracted by 2.4%. For the
period, February to June, Rwanda’s export revenue dropped
to $268.57 million, from $275.12 million in the same period
last year. The drop was largely a result of Rwanda’s mineral
exports dipping by 36.6 per cent, coffee earnings falling by
9.3 per cent, and tea revenue declining by 5.7 per cent over
the reporting period. Despite minerals remaining Rwanda’s
second largest foreign-exchange earner after tourism, for the
past two years their contribution to the national coffers has
been falling. The low export receipts have led to the central
bank injecting $8 million weekly to support imports. Previ-
ously, the central bank was putting in $4 million to $5 mil-
lion.
The April 2016 Budget Framework Paper showed that the
Nation Media Group
Africa and Middle East Peer Comparables Company Country P/Ex P/Bx EV/EBITDAx ROE% ROA% Div %
Safaricom KENYA 21.8 7.1 9.9 34.5 24.1 6.9
Mobile Telecom KUWAIT 9.5 1.0 4.9 10.3 4.6 7.7
National Mobile KUWAIT 17.6 0.8 3.6 4.6 2.2 9.3
VIVA Telecom KUWAIT 11.0 3.8 3.4 44.3 15.7 -
Ooredoo OMAN 8.7 1.8 3.1 21.7 12.0 6.3
Cellcom Israel ISRAEL 17.7 2.2 5.9 13.4 2.5 -
MTN Group SA - 1.8 5.8 2.4 1.1 9.4
Airtel Networks Zambia 16.7 9.4 3.3 72.9 7.6 3.1
Econet Wireless ZIM 14.0 0.7 1.8 4.8 2.6 3.0
Vodacom SA 16.6 9.0 7.9 55.9 17.2 5.4
Mean 14.8 3.8 5.0 26.5 9.0 6.4
Median 16.6 2.0 4.3 17.5 6.1 6.6
Source: Bloomberg
Valuation DCF Method
Risk free rate (5 year Bond) 12%
Beta 1.0
Risk premium 4%
Cost of equity 16%
Terminal growth 6%
KES (B) FY16 FY17F FY18F FY19F
Free cash flows 30.48 53.90 62.62 71.98
Period 0.6 1.6 2.6
Discounted FCFE 49.2 62.6 72.0
Terminal value 727.0
Total Discounted FCFE 910.8
Net cash/(debt) (27.1)
Equity value 883.7
No of shares (B) 40.0
Fair Value (KES) 22.07
EV/EBITDA Method FY17E
EBITDA 105.7
EV/EBITDA 9.0
EV 951.2
less net debt (27.1)
Equity 924.2
No of shares 40.0
Fair Value (KES) 23.08
P/E Method FY17
EPS 1.26
P/E 18.0
Fair Value (KES) 22.69
Blended Value
DCF Method 22.07
EV/EBITDA Method 23.08
P/E Method 22.69
Fair Value 22.62
Upside (%) 11.7
Source: ApexAfrica estimates
Nation Media Group
Income Statement KES B FY14 FY15 FY16 FY17F FY18F FY19F % y/y ch 3 yr CAGR Voice revenue 84.3 87.4 90.8 93.0 94.2 92.0 2.4 0.4 Messaging revenue 13.6 15.6 17.3 18.3 20.3 21.3 5.4 7.0 Mobile Data revenue 9.3 14.8 21.2 29.5 42.4 61.0 39.6 42.3 Fixed Data revenue 2.6 3.1 3.8 4.8 5.5 6.7 25.3 20.3 M-PESA revenue 26.6 32.6 41.5 53.7 64.8 77.9 29.4 23.4 Service revenue 136.4 153.6 174.6 199.3 227.3 258.8 14.1 14.0 Other service revenue 2.0 2.6 3.2 4.0 4.2 4.3 27.3 10.6 Handset revenue 5.0 7.1 8.6 8.2 8.9 9.6 -5.1 3.7 Acquisition and other 1.4 - 9.3 0.7 - - -92.2 -100.0 Total Revenue 144.7 163.4 195.7 212.2 240.3 272.7 8.5 11.7 Other income 0.1 0.6 0.2 5.6 8.5 13.3 2353.5 287.0 Direct costs (52.0) (56.7) (62.3) (67.6) (75.2) (83.2) 8.4 10.1 Construction costs - - (9.3) (0.7) - - -92.2 -100.0 Contribution 92.8 107.2 124.3 149.6 173.6 202.9 20.3 17.7 Operating Costs (31.9) (36.0) (41.0) (43.9) (50.5) (57.2) 7.2 11.7 Forex loss on trading activities - (0.1) (0.3) 0.0 - - -103.7 -100.0 EBITDA 61.0 71.2 83.1 105.7 123.1 145.7 27.2 20.6 Depreciation & amortization (25.8) (25.6) (27.9) (33.4) (33.8) (34.7) 19.7 7.5 Net financing income/ (costs) (0.2) 0.5 0.6 0.2 (0.1) 0.1 -74.6 -46.9 Taxation (12.0) (14.3) (17.7) (21.9) (26.8) (33.3) 24.2 23.6 Net Income 23.0 31.9 38.1 50.5 62.4 77.8 32.5 26.9 EPS 0.57 0.80 0.95 1.26 1.56 1.94 32.5 26.9 DPS 0.47 0.64 0.76 1.01 1.33 1.65 32.7 29.5 Balance Sheet KES B FY14 FY15 FY16 FY17F FY18F FY19F % y/y ch 3 yr CAGR Equity & Minority Interest 91.2 104.3 116.7 109.5 131.5 156.2 -6.2 10.2 Borrowings 5.1 0.5 - - - - Other liabilities - - - - - - Net assets 96.3 104.8 116.7 109.5 131.5 156.2 -6.2 10.2 Non-current assets 106.3 124.4 129.2 132.8 135.7 141.9 2.8 3.2 Current assets 28.3 32.6 29.9 53.3 45.2 57.2 78.0 24.1 Current liabilities (38.3) (52.2) (42.4) (76.6) (49.4) (42.9) 80.6 0.3 Net assets 96.3 104.8 116.7 109.5 131.5 156.2 -6.2 10.2 Cash flow statement KES B FY14 FY15 FY16 FY17F FY18F FY19F % y/y ch 3 yr CAGR Net operating cash flows 51.1 60.6 63.8 87.7 99.3 112.9 37.5 21.0 Net investing cash flows (28.9) (43.8) (33.3) (33.8) (36.6) (40.9) 1.6 7.1 Free cash flows 22.3 16.8 30.5 53.9 62.6 72.0 76.9 33.2 Net financing cash flows (19.7) (20.8) (36.3) (25.1) (68.0) (58.1) -30.9 17.0 Change in cash 2.6 (4.0) (5.8) 28.8 (5.3) 13.9 -596.8 -233.8 Cash at the start 15.0 15.9 11.9 6.1 5.5 0.2 -48.7 -75.1 Cash at the end 17.6 11.9 6.1 5.5 0.2 14.1 -9.9 32.1
Ratio analysis FY14 FY15 FY16 FY17E FY18F FY19F
Contribution margin (%) 62.0 64.2 65.6 63.5 70.5 72.2
EBITDA margin (%) 42.1 43.6 42.5 49.8 51.2 53.4
EBIT margin (%) 24.3 27.9 28.2 34.0 37.2 40.7
Financial leverage (x) 1.5 1.5 1.4 1.7 1.4 1.3
Net debt/equity (%) (5.5) (0.0) (0.1) 0.2 0.0 (0.1)
Net debt/EBITDA (x) (0.1) (0.0) (0.1) 0.3 0.0 (0.1)
ROaE (%) 26.8 32.6 34.5 44.6 51.8 54.1
ROaA (%) 17.5 21.9 24.1 29.2 34.0 40.9
Source: Company, ApexAfrica estimates
Nation Media Group
Key assumptions FY14 FY15 FY16 FY17E FY18F FY19F
Population (M) 43.7 44.9 46.1 46.7 47.9 49.2
Population Growth (%) 2.7 2.7 2.7 2.7 2.7 2.7
GDP growth (%) 5.2 5.3 5.6 5.9 6.0 6.3
Inflation (%) 5.7 6.9 6.6 6.0 6.0 6.0
Industry Mobile Subscribers (M) 31.8 34.8 38.3 41.9 44.1 45.2
Mobile penetration (using WB population stats) 72.8 77.6 83.2 89.8 92.0 92.0
Voice Drivers
Mobile Subscribers (M) 21.6 23.3 25.2 27.6 29.1 29.9
% chg 11.1 8.2 7.8 9.8 5.3 2.6
Market share 67.8 67.1 65.7 65.0 65.0 65.0
Effective minutes yield 3.5 3.6 3.0 2.8 2.6 2.5
% chg (0.2) 1.4 (15.0) (8.1) (5.8) (6.9)
Total Minutes (M) 23,868.1 24,397.1 29,815.8 33,249.5 35,745.7 37,489.3
Minutes of Usage 92.2 87.1 98.8 100.3 102.4 104.6
% chg (1.6) (5.6) 13.4 1.5 2.1 2.2
relative to GDP growth (0.3) (1.0) 2.4 0.3 0.4 0.3
Voice ARPU (KES) 325.8 312.0 300.7 280.5 269.9 256.7
% chg (1.8) (4.2) (3.6) (6.7) (3.8) (4.9)
M-PESA Drivers
M-PESA registered customers (M) 19.3 20.6 23.7 25.8 27.5 28.5
% of mobile subscribers 89.7 88.4 94.0 93.5 94.5 95.5
Revenue per user per transaction (KES) 34.1 36.2 38.4 41.3 42.7 44.9
% chg (5.1) 6.4 6.0 7.5 3.4 5.1
Total Transactions 780.0 900.9 1,081.0 1,301.9 1,519.5 1,737.1
Average monthly transactions per user 3.4 3.6 3.8 4.2 4.6 5.1
% chg 13.3 8.3 4.7 10.2 9.7 10.2
relative to GDP growth 2.6 1.6 0.8 1.7 1.6 1.6
M-PESA ARPU 114.4 131.8 146.2 173.2 196.6 227.7
% chg 7.6 15.2 10.9 18.5 13.5 15.9
SMS Drivers
Mobile Subscribers 21.6 23.3 25.2 27.6 29.1 29.9
SMS ARPU 52.6 55.8 57.4 55.1 58.1 59.3
p/p % chg 20.8 6.0 2.9 (4.0) 5.4 2.2
Mobile Data Drivers
Mobile Data subscribers (M) 9.6 11.6 14.1 16.3 19.3 23.0
% chg 34.1 21.2 21.5 15.5 19.0 19.0
growth relative to population growth (x) 12.6 7.9 8.1 5.8 7.2 7.2
Penetration rate (%) 44.3 49.6 56.0 58.8 66.5 77.1
Mobile Data ARPU (KES) 81.2 106.6 125.2 151.3 182.7 220.6
% chg 4.9 31.3 17.5 20.9 20.8 20.8
Fixed Data Drivers
Fixed data customers (M) 0.0 0.0 0.0 0.0 0.0 0.0
p/p % chg 4.3 22.8 21.6 17.0 21.1 20.2
Fixed Data ARPU (KES) 30,508.1 30,245.1 30,346.4 32,485.2 30,919.6 31,031.9
% chg 16.8 (0.9) 0.3 7.0 (4.8) 0.4
Service Revenue ARPU (KES) 534.5 557.7 588.8 613.1 663.0 734.3
Source: Company, World Bank, ApexAfrica estimates
Nation Media Group
Appendix
Investment ratings Buy: A total return is anticipated in excess of the market's long-term historic annual rate
(approximately 10%). Total return expectations should be higher for stocks that possess greater risk.
Hold: Hold the shares with neither a materially positive total return nor a materially negative total
return anticipated.
Sell: Stock should be sold as materially negative total return is anticipated.
Disclaimer ApexAfrica and its parent company Axys Group seek to do business with companies covered in their research reports.
Consequently, a conflict of interest may arise that could affect the objectivity of this report. This document should only be
considered a single factor used by investors in making their investment decisions. The reader should independently evalu-
ate the investment risks and is solely responsible for their investment decisions. The opinions and information portrayed in
this report may change without prior notice to investors.
This publication may not be distributed to the public media or quoted or used by the public media without prior and express
written consent of ApexAfrica or Axys Group.
This document does not constitute an offer, or the solicitation of an offer, for the sale or purchase of any security. Whilst
every care has been taken in preparing this document, no representation, warranty or undertaking (express or implied) is
given and no responsibility or liability is accepted by Apex Africa or any of its employees as to the accuracy of the infor-
mation contained and opinions expressed in this report.
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