November 2016

Company Update

Safaricom Limited

“Setting Trends The Techno Way”

Recommendation BUY Pegged on accelerated mobile data, sustained MPESA revenue growth and opex opti-

mization, we estimate that Safaricom will deliver a 26.9% CAGR in net earnings in

the next 3 years, translating into a forward P/E of 10.4x and ROaE of 54.1% in

FY19F. Based on this, we recommend a BUY on Safaricom with a Fair Value of

KES 22.60, r epresenting an 11.7% upside from cur rent pr ice. We fur ther high-

light our base arguments below and expound on them in the subsequent sections. Mobile data-All the way up! Based on accelerated smartphone penetration and increased adoption of data bundles,

we see mobile data ARPUs fast tracking at a 3 year CAGR of 20.8% to KES 220.64

in FY19F. Further, we estimate Safaricom’s mobile data subscribers to outpace popu-

lation growth by 7.0x for the next three years, resulting in a 58.8% and 77.1% mobile

data subscriber rate in FY17F and FY19F respectively. Mpesa– The service revenue linchpin Our forecasts suggest that MPESA will continue to be key in driving service revenue

growth, accounting for 29.6% of the same in FY19F from 26.4% in 1H17. We

estimate MPESA revenue to grow at a 3 year CAGR of 23.4% to KES 77.9B in

FY19F. Voice ARPU– Mature product? Certainly. We estimate subscriber growth to come in at a paltry 3 year CAGR of 5.3% while

effective minutes yield is set to decline at a 3 year CAGR 6.1%. Our view on sup-

pressed subscriber growth is based on limited upside for mobile penetration, recorded

at 90.0% (as of June 2016). Other discussion points: SMS contribution to falter (3 year CAGR of 7.0%) Fixed data- tough grubbing the mother lode EBITDA margin to expand as direct costs and opex growth lose momentum Equitel and the Kenyan Interbank Transaction Switch (KITS)– Are they

much of a threat? Key stats FY14 FY15 FY16 FY17E FY18F FY19F Revenue (KES B) 144.7 163.4 195.7 212.3 240.3 272.7 y/y % ch 16.4 12.9 19.8 8.5 13.2 13.5 EBITDA (KES B) 61.0 71.2 83.1 105.7 123.1 145.7 y/y % ch 23.8 16.8 16.7 27.2 16.5 18.3 EPS (KES) 0.57 0.80 0.95 1.26 1.56 1.94 y/y % ch 31.1 38.7 19.5 32.5 23.7 24.6 DPS (KES) 0.47 0.64 0.76 1.01 1.33 1.65 y/y % ch 51.7 36.2 18.8 32.7 31.4 24.6 EV/EBITDA (x) 13.2 11.8 10.0 8.2 6.9 5.7 P/E (x) 35.3 25.4 21.3 16.1 13.0 10.4 ROaE (%) 26.8 32.6 34.5 44.6 51.8 54.1 Div yield (x) 2.3 3.2 3.8 5.0 6.5 8.2 Source: Company, ApexAfrica estimates

Bloomberg Ticker : SAFCOM KN

Reuters Ticker: SCOM.NR

Share Statistics

Fair Value (KES) 22.60

Current Price (KES) 20.25

Issued shares (M) 40,065

Market cap (USD M) 8,330.3

Year end March

Free Float (%) 25.0

Foreign ownership (%) 13.0

Av daily trading vol (USD) 2,446,351

Price Return

Absolute Excess

3m 0.0% 5.3%

6m 16.7% 33.2%

12m 26.6% 43.2%

Price Trend

Source: Bloomberg

Research Analyst

Joy D’Souza

Head of Research

jdsouza@apexafrica.com

+254 723 420204

Nation Media Group

Nation Media Group

Topline: NMG continues to establish its substantial online

presence and extensive variety of digital content to grow rev-

enue. Its earnings from e-papers and online advertising are

projected to grow to about 10% of the company’s revenue by

2018. Estimated growth in the digital space in 2016 was

about 15% y/y. The last quarter of 2016 saw significant busi-

ness in print- increased advertising and the launch of new

products.

Attractive dividend yield: NMG cur rently trades at KES

88.00 end of KES 10.00 has been maintained for the past few

years.

Cash rich and no debt: It is wor thy to note that NMG is

cash liquid and unencumbered by debt. The new print press

of KES 2B bought earlier in March 2016 was paid in cash

upfront without any debt.

Up Coming Projects: The company is cur rently testing a

new Nation Media app that will allow users to access all sites

and publications on one platform. The app will enable NMG

to generate more revenue from online advertising. As the

elections approach, NMG’s focus will be on making signifi-

cant profits from political advertising and setting up election

websites where political parties can reach out to the citizens.

New studios: one in Eldoret, one in Kisumu and one in

Mombasa which will add to its revenue streams and attract

audiences in the region.

Nation Media Group

SMS contribution to falter Owing to cannibalization from data messaging, we see SMS

revenues growing at a slower pace (3 year CAGR of 7.0%

compared to historical 3 year CAGR of 19.5%) and conse-

quently contributing less to service revenue (7.8% in

FY19F). The anticipated growth however will be driven by

accelerated SMS volumes on account of regular promotions,

emergency top ups and the SMS bundles plan introduced by

the company in 1H17. While bundles are priced much lower

than normal SMSs (-80.0% lower), increased volumes will

ensure stability in SMS ARPU, which we forecast at a 3 year

CAGR of 1.1% to KES 59.3 in FY19F. Fixed data-tough grubbing the mother lode In FY16, Safaricom had 1,018 commercial buildings and

1,795 homes connected to its high speed fibre, quite insipid

figures in comparison to the potential that Nairobi alone of-

fers. The office and homes space remains quite competitive

with players like Liquid Telecom, Jamii Telecom, Dimen-

sion Data, Wananchi Group and Telecom kenya controlling

a substantial portion of the market. The Big Box, safaricom’s

decoder that allows users data and free to air channels failed

to gain traction, further highlighting the impregnable nature

of this space. We note that Safaricom continues to invest in fixed data with

plans underway to partner with Kenya Power to use its trans-

mission lines.

We estimate fixed data ARPU to grow at a measly 3 year

CAGR of 0.7%. However, owing to growth in subscribers,

fixed data revenue will accelerate at a 3 year CAGR of

20.3% to KES 6.7B in FY19F.

Source: Company filings, ApexAfrica estimates

Voice ARPUs– Mature product? Certainly. We estimate subscriber growth to come in at a paltry 3 year

CAGR of 5.3% while effective minutes yield is set to de-

cline at a 3 year CAGR 6.1%. As a result, voice ARPU will

decline at a 3 year CAGR of 5.1% to KES 256.7. Our view on suppressed subscriber growth is based on lim-

ited upside for mobile penetration, r ecorded at 90.0% (as

of June 2016). We have based our estimates on Safaricom’s

voice revenue performance on a stable minutes market share

of 65.0% for the next three years, assuming that at best, the

company should be able to defend its market share. A stable

market share will be sustained by Safaricom’s regional strate-

gy which saw the company record a 6.8% y/y rise in 30 day

active customers in 1H17. We expect Safaricom to increasingly carry out promotions

aimed at growing minutes of use as it fights to keep the price

sensitive subscribers in its space. Consequently, we see

minutes of use growing infinitesimally at a 3 year CAGR

of 2.0%, a pace that will not offset voice ARPU which we

estimate to decline at a 3 year CAGR of 4.3%. We also note that as mobile subscribers increasingly embrace

data calling applications, this may disrupt voice revenues

significantly in the long run (while bearing a positive impact

on data). This has however not been factored in our model as

we have no solid statistics to back this argument for now. Evidently, contribution of voice to service revenue will con-

tinue to fall going forward, which we estimate at 35.0% in

FY19F from 46.6% in 1H17.

Source: Company filings, ApexAfrica estimates

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

FY12 FY15 FY16 FY17F FY18F FY19F

Voice Mpesa Mobile dataFixed Messaging Other seviceHandset & others

0

0.02

0.04

0.06

0.08

0.1

0.12

0

50

100

150

200

250

300

350

FY14 FY15 FY16 FY17E FY18F FY19F

Voice ARPU (KES) y/y Subscriber growth

Nation Media Group

Inflationary pressures will increase in 2016 as the Rwandan

Franc (RWF) continues to depreciate against the United

States dollar (USD) and strong economic growth increases

demand pressures.

December 2016 inflation stood at 7.3%y/y up from 6% in

November. the increase was mainly driven by the continuing

increase in food and non-alcoholic beverage prices over the

reporting period. The annual average inflation rate between

December 2016 and December 2015 stands at 5.7 per cent

Interest rates

In 2016H1, money market interest rates remained stable with

slight upward trend. T-bills, repo and interbank interest rates

increased respectively to 7.29%, 3.62% and 5.93% in June

2016 from 6.76%, 2.36% and 3.73% in December 2015.

During the first six months of 2016, both lending and deposit

interest rates remained stable declining slightly to 17.2% and

7.9% respectively on average in compared to their levels

during the same period in the previous year 2015 where they

stood at 17.5% and 8.4% on average.

The deposit rates are forecast to stand at 8.6% in 2016 and

9.5% in 2017.

Fiscal policy-Budget and government borrowing

The Government of Rwanda wants to make Rwanda a mid-

dle-income country by 2020. To achieve this, they allocated

USD 1.13 billion to increasing youth employment and in-

crease productivity, a further USD 17.21 million towards

skills development, and USD 6.67 billion to the National

Employment Program.

The 2016/17 fiscal year’s (FY) budget is no different, with

total expenditure projected to increase by a marginal 3.6% to

reach RWfr1.85trn ($2.4bn). Domestic revenue is expected

to amount to 18.2% of GDP, while total grants are expected

to fall from 6.1% of

GDP in the previous fiscal year to 5.4% of GDP in 2016/17.

Current expenditure is expected to remain largely stable at

14.5% of GDP, while capital expenditure is expected to drop

from 12.6% of GDP to 11% of GDP in the 2016/17 FY. The

government has been compelled to adopt a more prudent

fiscal policy stance to reduce the country’s dependence on

donor support and increase fiscal autonomy. Recent external

headwinds have encouraged the government to ease demand

for imports by reassessing its infrastructure investment pro-

gram. This will undoubtedly have a negative impact on eco-

RWANDA

• GDP growth-expectations for 2016 and 2017 and

the drivers

Per the EIU, real GDP growth is forecast to average 6.6% in

2016/2017 driven by a combination of factors including for-

eign and public investment, services and exports. The main

challenge to face Rwandan economy in 2016-2025 period

will be the impact of debt because of falling foreign aid.

Since Rwanda is now deemed fit to transition from grant-

based financing to loan-based financing by the IMF debt lev-

els will increase gradually due to decline of foreign aid.

Rwanda’s economy expanded 5.2% y/y 3Q16 versus 5.9% y/

y in 3Q15. It was the lowest growth since 4Q13 (2.2%). On a

quarterly basis, the GDP shrank 3.7% q/q. This performance

pushed Rwanda’s GDP at current market prices to

Rwf1,662B, an increase from Rwf1,506B in the same period

of 2015. Agriculture grew 1% and contributed 0.4 bps to the

overall GDP growth, while activities in the industry sector

increased 7%. Service sector grew 6% and contributed 3% to

the overall economic growth over the third quarter of last

year. In agriculture, food crop growth was at 2%, while ex-

port crops declined by almost 13%, mainly because of a re-

duction in coffee and tea exports. However, the wholesale

and retail trade segments grew 9%, hotels and restaurants 6%

and public administration at 19% with information and com-

munication dropping 2%.

• Monetary policy-inflation and interest rates

Inflation

We expect inflation to average 5.5% in 2017 as oil prices are

expected to rise and as the RWF depreciates further. Looking

ahead, upward pressures are likely to come from high food

prices, rising costs for clothing and footwear and increasing

transport inflation.

Rwanda inflation increased by 9.1% y/y in November 2016.

The National Bank of Rwanda expects December 2016 infla-

tion to stand at 6% from 6.4% in November. The drop-in

inflation is attributed to expectation of fall in prices of fresh

products following the start of the rainy season. Inflation at

the end of 2016 is seen at 4.5%.

Though food inflation slightly reduced from 8.6% in 2015Q4

to 8.2% and 7.0% in 2016Q1 and 2016Q2 respectively, it

remained the highest contributor to headline inflation espe-

cially after the jump in vegetables inflation observed in No-

vember 2015.

Inflationary pressures will increase in 2016 as the Rwandan

Nation Media Group

•Foreign exchange-expectation on currency movement and drivers Fiscal and current-account deficits will put downward pres-sure on the Franc while monetary policy tightening in the US will lead to a strengthening of the dollar. The exchange rate is forecast to slip from an average of RWF722:USD1 in 2015 to RWF781:USD1 in 2016, before depreciating further, to RWF804:USD1, in 2017. The FRW has been quite stable for the last ten years as annu-al average depreciation stood below 5%. This stability was a result of high foreign inflows such as foreign aid and a mod-erate trade deficit. the imports bill has increased substantially since 2005 while export receipts remained relatively low, leading to the wid-ening of the trade deficit putting pressure on the Rwandan Franc. Thus, the FRW depreciated by 4.8% end June 2016 compared 3.6% recorded end June 2015 The Rwandan franc is expected to depreciate further this year because of falling commodity receipts, despite an ex-pected injection of $50 million in program support from the International Monetary Fund. no respite is expected on the currency front, with the franc, which has depreciated by 8 per cent against the greenback, projected to lose more ground against the dollar and fall by 9.8 per cent by the end of the year, In 2015, the FRW depreciated by 7.5%, the highest deprecia-tion recorded in Rwanda in last decades and in the first half of 2016, the Rwandan Franc continued to be under pressure due to low export revenues and high import demand and demand for dollars from different companies and govern-ment projects under the Public Private Partnership (PPP) framework which needs to mobilize hard currency from the domestic market. In the same period, the FRW depreciated by 9.4%, 7.8%, 5.5% and 6.7% against EURO, the Kenyan shilling, the Tan-zanian shilling and the Ugandan shilling respectively, while it appreciated by 2.0% versus the Burundian franc and by 7.0% versus the GBP.

The benefits of lower donor dependence and improved mac-

roeconomic stability should outweigh the costs related to

lower growth over the short term.

Turning to external balances, Rwanda’s wide merchandise

trade deficit is expected to maintain a shortfall in the overall

current account going forward. The country’s merchandise

trade deficit is expected to remain between 14% of GDP and

15% of GDP over the 2015-17 period before commencing a

narrowing trend. Consequently, the current account deficit is

expected to remain wide over the medium term, fluctuating

between 12% of GDP and 13% of GDP, before commencing

a narrowing trend by the end of the forecast period. The fis-

cal challenge in Rwanda is the end of being given grants.

They will now fully be reliant on borrowing.

• Balance of payment-current account deficit

Under a $204 million facility agreed in June, Rwanda re-

ceived $100 million from the IMF, improving its capacity to

import from 3.6 months in December 2015, to 3.8 months in

September. We got the facility, and that is why our reserves

remain comfortable. Today, we are at around 3.8 months of

import cover, and, with further disbursement of $50 million

before the end of the year, we expect the reserves to cover

4.3 months of imports,” said John Rwangombwa, Governor

of the National Bank of Rwanda.

During the first six months of this year, the country recorded

a 5.1 per cent rise in the trade deficit, from $858.98 million

in the same period last year to $902.69 million.

On the external sector, Rwanda’s trade deficit widened by

5.1% in the first half of 2016, from USD 858.98 million to

USD 902.69 million, as formal imports grew by 3.3% in val-

ue while formal exports value contracted by 2.4%. For the

period, February to June, Rwanda’s export revenue dropped

to $268.57 million, from $275.12 million in the same period

last year. The drop was largely a result of Rwanda’s mineral

exports dipping by 36.6 per cent, coffee earnings falling by

9.3 per cent, and tea revenue declining by 5.7 per cent over

the reporting period. Despite minerals remaining Rwanda’s

second largest foreign-exchange earner after tourism, for the

past two years their contribution to the national coffers has

been falling. The low export receipts have led to the central

bank injecting $8 million weekly to support imports. Previ-

ously, the central bank was putting in $4 million to $5 mil-

lion.

The April 2016 Budget Framework Paper showed that the

Nation Media Group

Africa and Middle East Peer Comparables Company Country P/Ex P/Bx EV/EBITDAx ROE% ROA% Div %

Safaricom KENYA 21.8 7.1 9.9 34.5 24.1 6.9

Mobile Telecom KUWAIT 9.5 1.0 4.9 10.3 4.6 7.7

National Mobile KUWAIT 17.6 0.8 3.6 4.6 2.2 9.3

VIVA Telecom KUWAIT 11.0 3.8 3.4 44.3 15.7 -

Ooredoo OMAN 8.7 1.8 3.1 21.7 12.0 6.3

Cellcom Israel ISRAEL 17.7 2.2 5.9 13.4 2.5 -

MTN Group SA - 1.8 5.8 2.4 1.1 9.4

Airtel Networks Zambia 16.7 9.4 3.3 72.9 7.6 3.1

Econet Wireless ZIM 14.0 0.7 1.8 4.8 2.6 3.0

Vodacom SA 16.6 9.0 7.9 55.9 17.2 5.4

Mean 14.8 3.8 5.0 26.5 9.0 6.4

Median 16.6 2.0 4.3 17.5 6.1 6.6

Source: Bloomberg

Valuation DCF Method

Risk free rate (5 year Bond) 12%

Beta 1.0

Risk premium 4%

Cost of equity 16%

Terminal growth 6%

KES (B) FY16 FY17F FY18F FY19F

Free cash flows 30.48 53.90 62.62 71.98

Period 0.6 1.6 2.6

Discounted FCFE 49.2 62.6 72.0

Terminal value 727.0

Total Discounted FCFE 910.8

Net cash/(debt) (27.1)

Equity value 883.7

No of shares (B) 40.0

Fair Value (KES) 22.07

EV/EBITDA Method FY17E

EBITDA 105.7

EV/EBITDA 9.0

EV 951.2

less net debt (27.1)

Equity 924.2

No of shares 40.0

Fair Value (KES) 23.08

P/E Method FY17

EPS 1.26

P/E 18.0

Fair Value (KES) 22.69

Blended Value

DCF Method 22.07

EV/EBITDA Method 23.08

P/E Method 22.69

Fair Value 22.62

Upside (%) 11.7

Source: ApexAfrica estimates

Nation Media Group

Income Statement KES B FY14 FY15 FY16 FY17F FY18F FY19F % y/y ch 3 yr CAGR Voice revenue 84.3 87.4 90.8 93.0 94.2 92.0 2.4 0.4 Messaging revenue 13.6 15.6 17.3 18.3 20.3 21.3 5.4 7.0 Mobile Data revenue 9.3 14.8 21.2 29.5 42.4 61.0 39.6 42.3 Fixed Data revenue 2.6 3.1 3.8 4.8 5.5 6.7 25.3 20.3 M-PESA revenue 26.6 32.6 41.5 53.7 64.8 77.9 29.4 23.4 Service revenue 136.4 153.6 174.6 199.3 227.3 258.8 14.1 14.0 Other service revenue 2.0 2.6 3.2 4.0 4.2 4.3 27.3 10.6 Handset revenue 5.0 7.1 8.6 8.2 8.9 9.6 -5.1 3.7 Acquisition and other 1.4 - 9.3 0.7 - - -92.2 -100.0 Total Revenue 144.7 163.4 195.7 212.2 240.3 272.7 8.5 11.7 Other income 0.1 0.6 0.2 5.6 8.5 13.3 2353.5 287.0 Direct costs (52.0) (56.7) (62.3) (67.6) (75.2) (83.2) 8.4 10.1 Construction costs - - (9.3) (0.7) - - -92.2 -100.0 Contribution 92.8 107.2 124.3 149.6 173.6 202.9 20.3 17.7 Operating Costs (31.9) (36.0) (41.0) (43.9) (50.5) (57.2) 7.2 11.7 Forex loss on trading activities - (0.1) (0.3) 0.0 - - -103.7 -100.0 EBITDA 61.0 71.2 83.1 105.7 123.1 145.7 27.2 20.6 Depreciation & amortization (25.8) (25.6) (27.9) (33.4) (33.8) (34.7) 19.7 7.5 Net financing income/ (costs) (0.2) 0.5 0.6 0.2 (0.1) 0.1 -74.6 -46.9 Taxation (12.0) (14.3) (17.7) (21.9) (26.8) (33.3) 24.2 23.6 Net Income 23.0 31.9 38.1 50.5 62.4 77.8 32.5 26.9 EPS 0.57 0.80 0.95 1.26 1.56 1.94 32.5 26.9 DPS 0.47 0.64 0.76 1.01 1.33 1.65 32.7 29.5 Balance Sheet KES B FY14 FY15 FY16 FY17F FY18F FY19F % y/y ch 3 yr CAGR Equity & Minority Interest 91.2 104.3 116.7 109.5 131.5 156.2 -6.2 10.2 Borrowings 5.1 0.5 - - - - Other liabilities - - - - - - Net assets 96.3 104.8 116.7 109.5 131.5 156.2 -6.2 10.2 Non-current assets 106.3 124.4 129.2 132.8 135.7 141.9 2.8 3.2 Current assets 28.3 32.6 29.9 53.3 45.2 57.2 78.0 24.1 Current liabilities (38.3) (52.2) (42.4) (76.6) (49.4) (42.9) 80.6 0.3 Net assets 96.3 104.8 116.7 109.5 131.5 156.2 -6.2 10.2 Cash flow statement KES B FY14 FY15 FY16 FY17F FY18F FY19F % y/y ch 3 yr CAGR Net operating cash flows 51.1 60.6 63.8 87.7 99.3 112.9 37.5 21.0 Net investing cash flows (28.9) (43.8) (33.3) (33.8) (36.6) (40.9) 1.6 7.1 Free cash flows 22.3 16.8 30.5 53.9 62.6 72.0 76.9 33.2 Net financing cash flows (19.7) (20.8) (36.3) (25.1) (68.0) (58.1) -30.9 17.0 Change in cash 2.6 (4.0) (5.8) 28.8 (5.3) 13.9 -596.8 -233.8 Cash at the start 15.0 15.9 11.9 6.1 5.5 0.2 -48.7 -75.1 Cash at the end 17.6 11.9 6.1 5.5 0.2 14.1 -9.9 32.1

Ratio analysis FY14 FY15 FY16 FY17E FY18F FY19F

Contribution margin (%) 62.0 64.2 65.6 63.5 70.5 72.2

EBITDA margin (%) 42.1 43.6 42.5 49.8 51.2 53.4

EBIT margin (%) 24.3 27.9 28.2 34.0 37.2 40.7

Financial leverage (x) 1.5 1.5 1.4 1.7 1.4 1.3

Net debt/equity (%) (5.5) (0.0) (0.1) 0.2 0.0 (0.1)

Net debt/EBITDA (x) (0.1) (0.0) (0.1) 0.3 0.0 (0.1)

ROaE (%) 26.8 32.6 34.5 44.6 51.8 54.1

ROaA (%) 17.5 21.9 24.1 29.2 34.0 40.9

Source: Company, ApexAfrica estimates

Nation Media Group

Key assumptions FY14 FY15 FY16 FY17E FY18F FY19F

Population (M) 43.7 44.9 46.1 46.7 47.9 49.2

Population Growth (%) 2.7 2.7 2.7 2.7 2.7 2.7

GDP growth (%) 5.2 5.3 5.6 5.9 6.0 6.3

Inflation (%) 5.7 6.9 6.6 6.0 6.0 6.0

Industry Mobile Subscribers (M) 31.8 34.8 38.3 41.9 44.1 45.2

Mobile penetration (using WB population stats) 72.8 77.6 83.2 89.8 92.0 92.0

Voice Drivers

Mobile Subscribers (M) 21.6 23.3 25.2 27.6 29.1 29.9

% chg 11.1 8.2 7.8 9.8 5.3 2.6

Market share 67.8 67.1 65.7 65.0 65.0 65.0

Effective minutes yield 3.5 3.6 3.0 2.8 2.6 2.5

% chg (0.2) 1.4 (15.0) (8.1) (5.8) (6.9)

Total Minutes (M) 23,868.1 24,397.1 29,815.8 33,249.5 35,745.7 37,489.3

Minutes of Usage 92.2 87.1 98.8 100.3 102.4 104.6

% chg (1.6) (5.6) 13.4 1.5 2.1 2.2

relative to GDP growth (0.3) (1.0) 2.4 0.3 0.4 0.3

Voice ARPU (KES) 325.8 312.0 300.7 280.5 269.9 256.7

% chg (1.8) (4.2) (3.6) (6.7) (3.8) (4.9)

M-PESA Drivers

M-PESA registered customers (M) 19.3 20.6 23.7 25.8 27.5 28.5

% of mobile subscribers 89.7 88.4 94.0 93.5 94.5 95.5

Revenue per user per transaction (KES) 34.1 36.2 38.4 41.3 42.7 44.9

% chg (5.1) 6.4 6.0 7.5 3.4 5.1

Total Transactions 780.0 900.9 1,081.0 1,301.9 1,519.5 1,737.1

Average monthly transactions per user 3.4 3.6 3.8 4.2 4.6 5.1

% chg 13.3 8.3 4.7 10.2 9.7 10.2

relative to GDP growth 2.6 1.6 0.8 1.7 1.6 1.6

M-PESA ARPU 114.4 131.8 146.2 173.2 196.6 227.7

% chg 7.6 15.2 10.9 18.5 13.5 15.9

SMS Drivers

Mobile Subscribers 21.6 23.3 25.2 27.6 29.1 29.9

SMS ARPU 52.6 55.8 57.4 55.1 58.1 59.3

p/p % chg 20.8 6.0 2.9 (4.0) 5.4 2.2

Mobile Data Drivers

Mobile Data subscribers (M) 9.6 11.6 14.1 16.3 19.3 23.0

% chg 34.1 21.2 21.5 15.5 19.0 19.0

growth relative to population growth (x) 12.6 7.9 8.1 5.8 7.2 7.2

Penetration rate (%) 44.3 49.6 56.0 58.8 66.5 77.1

Mobile Data ARPU (KES) 81.2 106.6 125.2 151.3 182.7 220.6

% chg 4.9 31.3 17.5 20.9 20.8 20.8

Fixed Data Drivers

Fixed data customers (M) 0.0 0.0 0.0 0.0 0.0 0.0

p/p % chg 4.3 22.8 21.6 17.0 21.1 20.2

Fixed Data ARPU (KES) 30,508.1 30,245.1 30,346.4 32,485.2 30,919.6 31,031.9

% chg 16.8 (0.9) 0.3 7.0 (4.8) 0.4

Service Revenue ARPU (KES) 534.5 557.7 588.8 613.1 663.0 734.3

Source: Company, World Bank, ApexAfrica estimates

Nation Media Group

Appendix

Investment ratings Buy: A total return is anticipated in excess of the market's long-term historic annual rate

(approximately 10%). Total return expectations should be higher for stocks that possess greater risk.

Hold: Hold the shares with neither a materially positive total return nor a materially negative total

return anticipated.

Sell: Stock should be sold as materially negative total return is anticipated.

Disclaimer ApexAfrica and its parent company Axys Group seek to do business with companies covered in their research reports.

Consequently, a conflict of interest may arise that could affect the objectivity of this report. This document should only be

considered a single factor used by investors in making their investment decisions. The reader should independently evalu-

ate the investment risks and is solely responsible for their investment decisions. The opinions and information portrayed in

this report may change without prior notice to investors.

This publication may not be distributed to the public media or quoted or used by the public media without prior and express

written consent of ApexAfrica or Axys Group.

This document does not constitute an offer, or the solicitation of an offer, for the sale or purchase of any security. Whilst

every care has been taken in preparing this document, no representation, warranty or undertaking (express or implied) is

given and no responsibility or liability is accepted by Apex Africa or any of its employees as to the accuracy of the infor-

mation contained and opinions expressed in this report.

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