(Addis Ababa) – Safaricom PLC’s net profits dropped by 17.7% in its half-year results for 2024, largely due to the sharp devaluation of the Ethiopian Birr, which caused significant foreign exchange losses. Despite growth in service revenues, particularly from mobile data, the company’s financial performance was severely affected by the currency crisis.
In its latest financial report for the six months ending September 30, 2024, Safaricom PLC reported a decline in net profits, which dropped to KSh 28.1 billion from KSh 34.1 billion in the same period last year. The company attributed this 17.7% fall to the dramatic depreciation of the Ethiopian Birr (ETB), which saw its value decrease by 106%. The devaluation resulted from the Ethiopian Central Bank’s decision to adopt a floating exchange rate regime, causing the Birr to weaken from ETB 57.7 to ETB 118.99 per US dollar.
Safaricom holds a majority stake of 51.7% in Safaricom Ethiopia and, under International Financial Reporting Standards (IFRS), is required to consolidate 100% of the subsidiary’s earnings in its financial results. This meant that despite most of the earnings from Safaricom Ethiopia being attributable to other shareholders, Safaricom PLC had to reflect these in its consolidated results, subjecting the company to significant currency translation losses.
The 106% depreciation of the Ethiopian Birr severely impacted Safaricom’s consolidated financial performance. All of Safaricom Ethiopia’s income and balance sheet had to be converted into Kenyan Shillings (KES), Safaricom’s functional currency. The resulting forex losses affected both revenue and profits, overshadowing any positive growth in the company’s underlying operations.
Growth in Ethiopia’s Service Revenue
Despite the negative impact from the currency depreciation, Safaricom’s service revenues showed growth. For the period under review, service revenue reached KSh 177.5 billion, a 12.9% increase from the same period last year. A key driver of this growth was mobile data, which remains the largest revenue contributor for Safaricom Ethiopia. Data revenue grew from KSh 1.3 billion in the first half of 2024 to KSh 2 billion in the first half of 2025, contributing 76.9% of total service revenue. However, voice revenue made up a smaller share, totaling just KSh 319.4 million.
While this increase in service revenue was positive, the impact of the Birr’s devaluation overshadowed these gains. Analysts at Sterling Capital noted that if not for the adverse effects of the Birr depreciation, Safaricom’s underlying income would have grown by 21.7%, amounting to KSh 36.7 billion compared to KSh 30.2 billion in 2024. The Birr’s devaluation, along with its hyperinflationary effects, reduced the company’s net profits significantly.
Foreign Exchange Impact on Safaricom’s Profits
The total impact of the Birr’s devaluation amounted to KSh 33.8 billion, which resulted in a considerable reduction in Safaricom’s net income. Excluding the effects of the currency depreciation and hyperinflation, Safaricom’s adjusted net income would have been KSh 20.8 billion. However, after accounting for these factors, the actual net income reported was KSh 54.7 billion.
This currency impact also led to significant revisions in both revenue and expense lines, making Safaricom’s performance appear much worse than it was operationally. Analysts pointed out that while the operational results showed solid growth, the currency translation losses distorted the company’s financial picture.
Challenges in Ethiopia’s Market and Safaricom’s Strategy
The devaluation of the Ethiopian Birr presents a major challenge for Safaricom, highlighting the vulnerabilities in its regional expansion strategy, particularly in the volatile Ethiopian market. Safaricom has invested significant resources in Ethiopia, and while the company continues to report growth in its key operational metrics, the currency risk has become a key factor affecting profitability.
However, there are positive developments as well. Safaricom Ethiopia has been allowed to integrate its systems with Ethiopia’s central government fuel platform, along with Ethiotel’s Telebirr service, enabling M-Pesa to be used for fuel payments. This integration could help M-Pesa become further entrenched in Ethiopia, expanding its use cases and potentially increasing adoption among the local population.
To manage the significant foreign exchange exposure, analysts suggest that Safaricom may need to implement hedging strategies, make further operational adjustments, and localize more of its operations in Ethiopia. Safaricom has already taken steps to localize some of its debt in the Ethiopian subsidiary, which may help mitigate future currency translation losses.
| Key Figures | Details |
|---|---|
| Net Profit Decline | KSh 28.1 billion, a 17.7% drop from last year |
| Revenue Growth | 12.9% increase to KSh 177.5 billion |
| Ethiopian Birr Depreciation | 106%, from ETB 57.7 to ETB 118.99 per USD |
| Mobile Data Revenue | KSh 2 billion, 76.9% of total service revenue |
| Adjusted Net Income (Excluding Forex Impact) | KSh 20.8 billion |
| Net Income After Forex Adjustments | KSh 54.7 billion |
| Forex Impact on Safaricom’s Earnings | KSh 33.8 billion loss due to Birr depreciation |