East African telecommunications operator Safaricom Plc’s annual profit jumped 67%, beating analysts’ expectations, after its unit in populous Ethiopia narrowed its loss.
Overall net income for the Vodacom Group unit was 99.7 billion shillings ($772.3 million) in the year through March, exceeding the 92.4 billion-shilling estimate by analysts in a Bloomberg survey.
Startup losses in Ethiopia halved, and the unit is on track to break even, Chief Executive Officer Peter Ndegwa said in an earnings presentation on Thursday. In 2022, Kenya’s biggest company by market value launched operations in the nation with continent’s second-largest population but one with the lowest rates of mobile penetration and internet connectivity.
Safaricom Telecommunications Ethiopia Plc now has 13.6 million customers, a growth of 54% from a year earlier. The EBIT loss is seen shrinking further this year to between 12 billion shillings and 15 billion shillings.
“Ethiopia is starting to become a material part of our group with close to 15% contribution to group-revenue growth,” Ndegwa said. “We expect this business to have even greater impact in the future.”
Lower losses in Ethiopia helped Safaricom post a record dividend of 692.3 billion shillings, or 2 shillings per share, Ndegwa said.
‘Maturing business’
Capital spending in Ethiopia will drop to between 6 billion shillings and 9 billion shillings, half of what was invested in the country last year as Safaricom gets closer an infrastructure network of 4 000 sites.
“The reduction in Ethiopia capex shows a maturing business moving away from high investment phase that we have been on over the past few years to normalised investment profile,” Ndegwa said.
M-Pesa, Safaricom’s popular mobile-money product, grew revenue by 13% to 182.7 billion shillings, and now contributes nearly 46% of Kenya’s service revenue.
“Mobile data is Safaricom’s main growth driver following the decline of voice and messaging,” according to Nairobi-based Sterling Capital.
Vodacom, South Africa’s biggest mobile operator, agreed in December to take control of East Africa’s largest telecommunications provider Safaricom in a deal valued at about $2.4 billion.
Kenya’s National Assembly has approved the partial divestiture of the National Treasury’s 15% shareholding in Safaricom to Vodacom, which will hold 55% of Safaricom after the deal is concluded.
For the year to date, the company’s shares have gained 6%, compared with the Nairobi Securities Exchange all-share index, which has climbed 9% during the period.
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