M-Pesa Revenue Mobile Data & Fixed Service Revenue
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/ HIGHLIGHTS 0101 / HIGHLIGHTS 06 - 07 Performance at a Glance 08 - 11 Chairman’s Statement 12 - 15 CEO’s Statement Our Coverage Kenyan landmass 72% 27% 27% 2G 3G 3G Population 92% 69% 69% 2G 3G 3G 81% Mobile phone penetration in Kenya (Communications Authority of Kenya) 02 / BUSINESS REVIEW 18 - 19 What We Do 20 The Value We Create 21 Our Strategic Priorities 22 How We are Managed 24 - 25 Who Governs Us 26 - 27 Who Leads Us 28 - 33 Corporate Governance Statement 34 - 37 Risk Management 03 / STRATEGIC REVIEW 40 - 42 Delighting Our Customers 43 Democratising Data 44 - 45 Best Network in Kenya 46 - 47 Deepening Financial Inclusion 48 - 49 Partner of Choice for Business 50 - 55 Staying Ahead of the Curve 56 - 57 Growing Youth Appeal 58 - 61 Brand Assets 62 - 69 Social Impact 70 - 73 Sustainability 04 / FINANCIAL REVIEW 77 Directors’ Report 78 Statement of Directors’ Responsibilities 79 Report of The Independent Auditor 80 Consolidated Statement of Comprehensive Income 81 Consolidated Statement of Financial Position 82 Company Statement of Financial Position 83 - 84 Consolidated Statement of Changes in Equity 85 Consolidated Statement of Cash Flows 86 - 134 Notes 135 Shareholding Information / ADDITIONAL 05 INFORMATION 138 -139 Notice of The Annual General Meeting 140 -145 Directors and Senior Leadership Team 146 Corporate Information 147 Proxy Form 3 01 / HIGHLIGHTS Kenya’s frst and only 4G (LTE) 4 SAFARICOM ANNUAL REPORT 2015 01 HIGHLIGHTS 5 PERFORMANCE 01 / HIGHLIGHTS AT A GLANCE TOTAL REVENUE TOTAL SERVICE REVENUE FY 12 107.00 FY 12 100.19 FY 13 124.29 FY 13 118.05 FY 14 144.67 FY 14 138.36 FY 15 163.36 FY 15 156.25 0 50 100 150 200 0 50 100 150 200 Kshs Billion Kshs Billion VOICE REVENUE MESSAGING REVENUE FY 12 68.96 FY 12 7.7 7 FY 13 77.33 FY 13 10.15 FY 14 84.37 FY 14 13.62 FY 15 87.41 FY 15 15.63 0 20 40 60 80 100 0 5 10 15 20 Kshs Billion Kshs Billion M-PESA REVENUE MOBILE DATA & FIXED SERVICE REVENUE FY 12 16.87 FY 12 6.59 FY 13 21.84 FY 13 8.73 FY 14 26.56 FY 14 11. 8 8 FY 15 32.63 FY 15 17.95 0 10 20 30 40 0 5 10 15 20 Kshs Billion Kshs Billion EBITDA FREE CASH FLOW FY 12 37.50 FY 12 9.35 FY 13 49.24 FY 13 14.51 FY 14 60.94 FY 14 22.69 FY 15 71.19 FY 15 27.52 0 20 40 60 80 0 5 10 15 20 25 30 Kshs Billion Kshs Billion 6 SAFARICOM ANNUAL REPORT 2015 We continue to deliver the best service to our customers that has seen the company rewarded with strong commercial and fnancial performance. DIVIDEND FY 12 8.80 FY 13 12.40 FY 14 18.83 FY 15 25.64 0 5 10 15 20 25 Kshs Billion CUSTOMER NUMBERS FY 12 19.07 FY 13 19.42 FY 14 21.57 FY 15 23.35 0 5 10 15 20 25 Million NUMBER OF BASE STATIONS Total (2G + 3G) 2,690 FY 12 3G 1,439 Wimax 187 Total (2G + 3G) 2,905 FY 13 3G 1,604 Wimax 203 Total (2G + 3G) 3,140 FY 14 3G 1,847 Wimax 203 Total (2G + 3G) 3,382 FY 15 3G 1,943 4G 236 Wimax 195 0 1000 2000 3000 4000 7 CHAIRMAN’S 01 / HIGHLIGHTS STATEMENT The ICT sector realised a growth of 13.4% in 2014. The sector now contributes an estimated 8.4% to the GDP and, with well guided policies, the sector is estimated to attain the Vision 2030 target of contributing 10% to the country’s GDP by 2017. As the chairman of the Board it gives me great pleasure to take this opportunity to update you on the performance, the competitive and regulatory environment and economic factors affecting our business. In the period under review, we continued with the execution of our strategy which enabled us to continue to deliver unmatched customer experience which in turn led to strong results and sustainable shareholder returns. Kenya’s economy remained fairly stable growing at 5.3%, a slight reduction compared to 5.7% in 2013. The performance was supported by a reduction in energy prices and increased government spending on major projects by both the national and the devolved Governments. The ICT sector realised a growth of 13.4% in 2014. The sector now contributes an estimated 8.4% to the GDP and, with well guided policies, the sector is estimated to attain the Vision 2030 target of contributing 10% to the country’s GDP by 2017. There is no doubt that a signifcant part of this growth is attributable to the mobile telecommunications sector where Safaricom and other players continue to contribute substantial gains to the economy. In the year, interest rates remained stable with the Central Bank of Kenya maintaining the Central Bank Rate (CBR) at 8.5% and a modest increase in infation by 1.2 ppt to 6.9%. On the foreign currency exchange market, the Kenya shilling weakened against the dollar, a factor attributable to the declines in dollar infows mainly from the tourism sector. The Board recommended a dividend of 64 cents per share, totalling Kshs 25.64 billion, an increase of 36%. This is once again the largest dividend in Kenyan history. Our superior capabilities continue to enable us to support our key stakeholders in their endeavour to improve the lives of our customers and the people of Kenya as a whole. Our commitment to continue transforming lives remains strong and with our strategy in place, we are confdent that we shall continue creating value for our shareholders and customers. 8 SAFARICOM ANNUAL REPORT 2015 KEY REGULATORY HIGHLIGHTS CORPORATE GOVERNANCE Renewal of Operating Licence During the year there was a change in the composition of the Board of Directors. Mr. Gianluca Ventura was The regulatory environment remains an area of appointed to the Board as a non- executive Board importance to our operations. As noted during our half member, replacing Mr. Sunil Sood who resigned during year results, our operating licence was renewed in July the year. last year for a further ten-year period. I welcome Mr. Gianluca to the Board and wish to sincerely Acquisition of Additional Spectrum thank Mr. Sood for his contribution during the year. We also acquired additional spectrum after concluding the purchase of Essar Telecom’s assets. This has helped us continue improving our network coverage and provide quality services to our customers. LOOKING FORWARD The fnancial year under review was a phenomenal year Mobile Termination Rates (MTR) for Safaricom, having continued to establish ourselves as In the same period, there was a reduction in the Mobile a leading telecom operator at the forefront of innovation Termination Rates (MTR) from Kshs 1.15 to Kshs 0.99 with and transforming lives. effect from July 2014 in line with glide path that the Telecommunications is becoming ever more present in Communications Authority of Kenya (CA) prescribed in more areas of life. We are focused on continuing to lay 2010 that saw the reduction of the MTR from Kshs 4.42 in the foundation for new growth in all areas of our business, 2010 to a fnal rate of Kshs 0.99 in 2014. exploit new opportunities as well as to strengthen and National Police Surveillance diversify our existing product portfolio. Project With the commitment of our employees, the continued Safaricom was contracted by the Government through support of our investors, and the unwavering loyalty of the the Ministry of Interior and National Coordination to millions of our customers, coupled with our understanding build the National Police Surveillance, Communication of our customers’ needs, we shall continue to deliver and Control System that introduces a technology value to our stakeholders. Our commitment to continue driven approach to Police work. This will go a long way transforming lives remains strong and with our strategy in in enhancing security and creating a better business place, we are confdent that we shall continue creating operating environment. value for our shareholders. Universal Service Fund (USF) The CA implemented the Universal Service Fund (USF) and Safaricom is currently paying the Universal Service Levy as required. Meanwhile, Safaricom and other operators through the industry lobby groups, Kenya Telecommunications Network Operators (KTNO) and Telecommunications Operators Service Providers (TESPOK), are engaging the CA on various matters with respect to the operationalisation of the USF. MR. NICHOLAS NGANGA CHAIRMAN 9 TAARIFA YA 01 / HIGHLIGHTS MWENYEKITI Sekta ya Teknolojia ya Habari na Mawasiliano, yaani ICT, ilishuhudia ukuaji wa 13.4% katika mwaka wa 2014. Hivi sasa Sekta hii inachangia 8.4% kwenye Jumla ya Pato la Taifa (GDP), na kukiwa na sera zilizo na mwongozo mzuri, sekta hii inatarajiwa kutimiza malengo ya Ruwaza ya 2030 ya kuweza kuchangia 10% kwenye Jumla ya Pato la Taifa (GDP) kufkia 2017. Kama Mwenyekiti wa Bodi ya Wakurugenzi, nina furaha kubwa kuchukua fursa hii kuwaarifu kuhusu matokeo, hali ya ushindani wa kibiashara na kanuni za udhibiti pamoja na hali ya kiuchumi inayoathiri biashara yetu. Katika kipindi cha mwaka tunaochambua, tuliendelea kutekeleza mkakati wetu ambao ulituwezesha kuendelea kutoa huduma toshelevu za kipekee kwa wateja, jambo ambalo lilichangia upatikanaji huu wa matokeo bora na faida kwa wamilikihisa. Uchumi wa Kenya ulibakia imara na kukua kwa 5.3% katika mwaka wa 2014, ingawa ulishuka kidogo inapolinganishwa na 5.7% mwaka wa 2013. Matokeo haya yalisaidiwa na kupungua kwa gharama ya kawi na kuongezeka kwa matumizi ya serikali katika miradi mikubwa pamoja na miradi mingine iliyotekelezwa na serikali za ugatuzi.