Company Profile

Safaricom

Kenya

Telecommunication Services – Wireless Telecommunication Services

http://www.safaricom.co.ke/

Safaricom is an integrated communications company with voice and data services, including prepaid and postpaid voice plans, messaging services, and fixed and mobile broadband products.  The company also provides financial services through its M-PESA network, which enables the banked and unbanked people of Kenya to transfer funds between themselves and businesses.

Impacts and Opportunities for Telecommunications Companies

Digital Divide

At the end of 2012, Africa had the world’s lowest internet penetration at 6.7% of households, well below a global average of 41.3%.  Costs can be prohibitive as services cost 20%-50% of average incomes in Africa, compared with 2%-5% in other developing countries1. Mobile cellular penetration has increased throughout Africa at a pace unequaled elsewhere in the world and was expected to reach 80% by the end of the first quarter of 20132.

Safaricom is committed to addressing the digital divide and the growing gap between Kenyans with access to technology and those without: “We see every day how mobile technology is able to uplift communities, empower citizens, and to help companies and individuals reduce their environmental footprints by getting things done in smarter, more efficient ways.”  The company does this by offering low price smartphones and tablets, along with data bundling options, and financial services to its customers. As of March 2013, Safaricom had over 19 million customers in Kenya, which represents 64.5% of the total customer base, and 72.6% of mobile data customers.

Mobile Banking

Worldwide there are 1.8 billion people who have a mobile phone but no bank account.  In developed and developing countries alike it is expected that the number of people who will utilize their mobile device to access banking services will rise from 33 million in 2012 to 96 million by 20163.

Safaricom’s most successful service, M-PESA, has over 17 million subscribers.  M-PESA is a payment network that enables the transfer of funds between people as well as businesses.  Mobile phone-based money transfer services like M-PESA have helped raise the percentage of Kenyan adults with access to banking services to 66.7% in 2013, up from 41% in 2009.  In conjunction with the Commercial Bank of Africa, Safaricom launched M-Shwari, a product designed to improve financial inclusion.  M-Shwari allows customers to save, earn interest, and borrow money using their mobile phones and the M-PESA platform.

Energy Efficiency

Energy use is anticipated to rise due to the growth of mobile users overall, as well as an increase of devices per user. However, energy efficiency improvements are expected to reduce the carbon footprint per user by 20% in 2020 from a 2007 baseline4.

Safaricom recently launched its “Best Network in Kenya” initiative aimed at improving network quality, capacity, and coverage.  As part of this effort, the company has devoted significant capital expenditures to upgrading facilities.  Some upgrades aim to minimize environmental footprint, while others increase capacity.  For example, in 2012, the company converted the power source at 34 base stations from diesel generators to an efficient hybrid energy system.

Areas for Improvement

Strengthened Supplier Standards

Verizon has established environmental standards for its suppliers, however, Portfolio 21 has requested that the company improve the transparency requirement in its supplier questionnaire in order to ensure compliance.

Environmental Management

While Safaricom reports on its carbon footprint, including its network and retail stores, the company has no reduction goals across any key performance indicators. Portfolio 21 has asked the company to establish reduction goals and report group-wide performance annually.

Expand Use of Efficient Technology

Safaricom has slowly increased the number of base stations powered by renewable energy, however a majority of its base stations rely on power from the electricity grid.  We have asked the company to increase the percentage of base stations powered by renewable energy in order to minimize the company’s carbon footprint.

 

  1. International Telecommunication Union. “Measuring the Information Society.” 2013.  Accessed March 18, 2014. http://www.itu.int/en/ITU-D/Statistics/Documents/publications/mis2013/MIS2013_without_Annex_4.pdf []
  2. Tech Crunch. “ABI: Africa’s Mobile Market To Pass 80% Subscriber Penetration in Q1 Next Year; 13.9 of Global Cellular Market By 2017.” Accessed March 24, 2014. http://techcrunch.com/2012/11/28/abi-africas-mobile-market-to-pass-80-subscriber-penetration-in-q1-next-year-13-9-of-global-cellular-market-by-2017/ []
  3. Wharton, University of Pennsylvania.  “Mobile Banking: The Next Big Thing Is Finally Here.” April 25, 2013.  Accessed March 24, 2014. https://knowledge.wharton.upenn.edu/article/mobile-banking-the-next-big-thing-is-finally-here/ []
  4. Ericsson.  “Ericsson Sustainability and Corporate Responsibility Report 2012,” April 2013.  Accessed February 14, 2014.  http://www.ericsson.com/res/thecompany/docs/corporate-responsibility/2012/2012_corporate_responsibility_and_sustainability_report.pdf []

To the best of our knowledge the above information is accurate and was obtained from sources we believe to be reliable. Neither the information presented above nor any opinion expressed shall be construed as an offer to sell or a solicitation to buy the security. The views expressed are those of portfolio management as of 3/31/14 and may not reflect current opinions or subsequent events.

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