SMS revenue drops as consumers opt for cheap calls

By Silas Apollo

Life for the average Kenyan continues to be a struggle, with many now opting for cheaper communication and transactions to beat the harsh economic times.

According to data released by telecommunication giant Safaricom, most Kenyans are now choosing easier and more affordable means of communication, such as messages over voice calls to survive.

Most Kenyans are also taking up more loans and overdraft facilities to cater to their financial needs, a pointer to what could be an emerging trend in search of easy cash by those hit hardest by the economic hardship.

By market share, Safaricom is the largest telecommunication company in the country, meaning that data provided by the telco could represent the changing lifestyle of a majority of Kenyans.

Data by the Communications Authority shows that Safaricom now controls about 66% of the country’s mobile (SIM) subscriptions as of December last year. Its closest rivals, Airtel, Telkom, and Finserve (Equitel), follow at positions two, three, and four with about 26.3%, 4.9%, and 2.3 %, respectively.

According to Safaricom’s full-year results for the year ended March 31, 2023, revenue from voice calls declined by about 2.8% to Sh80.92 billion as most subscribers opted for other means of communication. 

This is while services such as messaging considered slightly cheaper than voice calls, grew by about 4.6% to about Sh11.37 billion. The telco company says that the growth in messaging services was partly supported by a 5.1% growth in average revenue per user. 

“Messaging grew 4.6% YoY to Sh11.37Bn supported by 5.1% growth in ARPU to Sh43.82. Usage increased with messages per sub growing 25.9% to 191.6 while the rate per message declined 16.6% to Sh0.23. Voice and messaging revenue are now 31.3% of service revenue,” Safaricom says.

“Voice revenue declined by 2.8% YoY to Sh80.92Bn due to continued competition from new technological influences. 

“Our customer Value Management (CVM) initiatives and propositions have enabled us to offer differentiated and personalized offers. We continue to drive affordability with a rate per minute declining 2.4% to Sh1.38 as at H2 FY23,” the telco added.

Regarding access to credit and other loan services, Safaricom says that the number of Kenyans borrowing funds from its benefits, such as Fuliza and M-Shwari, also increased during the same period.

For instance, on using Fuliza, the company says that funds disbursed through the service grew by about 39.6 percent, indicating an increasing appetite for the overdraft facility by most Kenyans.

Safaricom says it disbursed about Sh701.5 billion to Kenyans through Fuliza, compared to about Sh502.6 billion in the same period the previous year. 

Fuliza is an overdraft facility that enables customers to access an unsecured line of credit by overdrawing on M-PESA to cover short-term cash flow shortfalls, subject to an applicable pre-determined limit. The facility is underwritten by the two banks, NCBA and KCB Bank.

Consequently, the disbursement of loans through other facilities, such as M-Shwari, increased by about 6.3%. Safaricom says it disbursed about Sh91.5 billion in the period under review, up from about Sh86.1 billion it had disbursed the previous year.

M-Shwari, unlike Fuliza, is a micro-lending facility alongside KCB-M-PESA. The two services enable customers to save as little as Sh1 and get loans from Sh50 to Sh1 million.

Mr Wilson Wariari says that while the data from Safaricom may not fully represent the financial position of the average Kenyan, it does illustrate growing consumer trends in the country.

“The correlation between the data and what every average Kenyan feels may be difficult to paint from the data. But what these data shows overall is that the consumer habits are changing. People are now opting for other alternatives, such as the internet. At the same time, the growth of messaging is also being driven heavily by corporate SMSs,” Mr Wariari, a financial market analyst, said.

Safaricom argues that a drop in revenues in some sectors could be attributed to outside factors, such as the war in Ukraine  and global recession, which affected its operations and earnings for its customers.

“We are pleased with our performance in FY23 despite the challenging operating environment characterised by geopolitics with the Russia-Ukraine war, 2022 general elections in Kenya, macroeconomic challenges, and drought, which have constrained consumers’ wallet,” the company said. 

“Our Group service revenue grew 5.2% to Sh295.69Bn Year on Year (YoY) in FY23, backed by M-PESA, Mobile Data, and Fixed Data growth,” it added.