Market Commentary:
- The All Share Index gained by 0.03% to close the day at 137.77. We partly attribute this to gains on Safaricom (+1.0% to KES 29.00). However, the NSE 20 Index retreated by 0.1% to close the day at 1,945.64.
- The banking sector accounted for 59.4% of the day’s traded value with notable price declines on Stanbic (-4.7% to KES 80.25), Equity (-3.9% to KES 33.0) and KCB (-2.6% to KES 35.00).
- WPP Scangroup gained 4.5% to KES 17.25 following the recent completion of the sale of some of its assets(subsidiaries). This comes as positive news to investors as the company is expected to payout at least 40.0% of net proceeds from the sale in form of a special dividend.
- Overall, foreign investors maintained a net-selling position accounting for 71.1% of the day’s sales against 35.3% of the day’s purchases.
News Highlights:
Safaricom Market Share Declines Marginally to 64.5% in 1Q2020
According to the Communication Authority of Kenya (CA) 1Q2020 industry statistics, Safaricom’s market share in customer subscriptions dipped to 64.5% in 1Q2020 (4Q2019: 64.8%). However, this was a 3.4% year-on-year improvement compared to the 1Q2019 (62.4%).
The company’s mobile customers increased by 11.8% y/y to 35.6 million. Airtel Kenya’s mobile subscribers on the other hand edged up by 10.3% y/y to 14.6 million. Consequently, Airtel’s market share grew to 26.6% (4Q2019: 25.9%). Telkom registered a 21.3% y/y decline in subscribers to 3.2 million.
Safaricom’s was the only company to record growth in market share in the SMS segment to 94.9% (4Q2019: 94.1%). The company’s SMS usage grew by 9.2% y/y to 16.0 billion text messages.
Voice market share however fell to 65.7% (1Q2019: 67.1%) as total minutes grew marginally by 0.1% q/q to 10.1 billion. On a year-on-year basis, total minutes grew by 2.3%.
Safaricom’s market share of mobile money subscriptions stood at 98.8% while the value of mobile money transactions market share stood at 99.5%. The number of MPESA agents fell by 1.5% q/q to 173,259 while active registered mobile money subscriptions increased by 0.8% q/q to 28.8 million.
Safaricom registered the highest market share in mobile data market subscriptions, edging up marginally to 68.8% (4Q2019: 68.7%). We opine that this may have been driven by the “no expiry” promotion in October. Airtel, Telkom and Equitel recorded 25.8% (4Q2019: 25.5%) 5.0% (4Q2019: 5.4%) and 0.4% (4Q2019: 0.5%) respectively. Overall mobile data subscriptions declined by 0.8% q/q to 38.8 million. According to the CA, the decline was attributed to a decline on Telkom Kenya as it scaled down on investments in anticipation of the proposed Airtel-Telkom merger.
Fixed data registered subscriptions remained at 165,810 users; maintaining its market share at 33.1%.
Commentary
We expect some of the COVID-19 measures to have some impact on the company’s performance. In particular we note that the free mobile money transactions (for P2P transactions below KES 1,000) may significantly impact MPESA revenues.
According to the CBK, these low value transactions are stated to make up 80.0% of mobile money transactions. Safaricom initially estimated it could lose up to KES 5.5 billion in the first three months.
With the extension up to 31st December 2020 and without additional measures to plug leakages (from customers splitting higher value transactions) this could reach KES 16.5 billion.
The CBK also noted that despite mobile money customers rising by 1.6 million since the measures were implemented in March, business transactions have declined slightly. However, transactions of higher amounts have increased due to the higher transaction limits.
We don’t expect this to make up for the lost revenue in the lower transaction bands.
Recommendations:
Long Term Buy- KCB, Equity, Absa, Stanbic, NCBA
Hold- Safaricom
Sell- Stanchart, Bamburi, HF