Safaricom short-term loans double to Sh43.5 billion

Safaricom PLC Chairman, Adil Khawaja (centre) with Safaricom PLC Chief Executive Officer (CEO), Peter Ndegwa and Safaricom PLC Chief Finance Officer, Dilip Pal, during the 2022-2023 Financial Year Results announcement at Michael Joseph Centre on May 11, 2023. PHOTO | POOL   

By KEPHA MUIRURI More by this Author

Safaricom’s short-term borrowings more than doubled to Sh43.49 billion in the year ended March as the telecoms firm accelerated investments to expand its network in

Kenya and Ethiopia.

The debt, payable within 12 months, rose from Sh20.4 billion a year earlier.

The spike in short-term borrowings has lifted the firm’s total debt by 31 percent to Sh85.5 billion from Sh65.3 billion after adding long-term borrowings which were utilized to fund the Ethiopia entry.

Safaricom’s net debt is however lower at Sh63.4 billion (Sh34.5 billion in the prior year) after netting off its cash holdings.

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Higher short-term borrowings for the telco came despite the earlier conversion of a Sh54.8 billion ($400 million) short-term facilities into medium-term loans mid-last year, in a move targeted at improving cash flows and reducing forex-exchange risks.

Long-term borrowings nevertheless slowed down by 6.4 percent to Sh42.05 billion from Sh44.9 billion previously.

The telco has short-term and long-term revolving facilities with various financial institutions from which it bankrolls its spending.

Safaricom is for instance funding investments in new growth areas in Kenya while Ethiopia’s capital expenditure mainly entails startup costs.

In the year to March, for instance, Safaricom put up 1,272 network sites in Ethiopia as it commenced commercial operations while beginning construction on another 379 sites

“We’ve invested heavily in the last year and is one of the heaviest Capex, closing at over Sh40 billion for Kenya (in the last year) and Sh55.8 billion in Ethiopia,” noted Safaricom’s chief finance officer Dilip Pal.

As of March 31, 2022, the company had undrawn credit facilities with various banks equivalent to Sh21.925 billion.

Safaricom’s debt pile is expected to continue rising in coming years as the firm continues to incur both Ethiopia expansion costs and network improvement in Kenya.

Safaricom projects to spend between Sh40 billion and Sh45 billion in the current financial year ending March 2024 on the Ethiopia project while sinking between Sh42 billion and Sh45 billion in Kenya.

“The increase in Capex in Kenya is primarily to support new growth areas of 5G, fixed and also maintain the existing business,” noted Safaricom CEO Peter Ndegwa.

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The telco is relying on vendor financing and third-party funding from development financing institutions and local banks with the funding sources complementing equity funding from itself and the project’s partners.

For instance, Safaricom disclosed it was winding down discussions with the International Finance Corporation on potential equity and debt financing for the project.

→ kmuiruri@ke.nationmedia.com