Telecommunication firm Safaricom’s debt has risen five times to a record Sh. 76.9 billion. The debt increased 5.2 times from the 2020 financial year debt of Sh. 14.7 billion. Sh. 62.2 billion of this debt is in the form of short-term debt.
This saw Safaricom join other firms such as Kenya Airways, Kengen, and Kenya Power as one of the largest corporate borrowers in Kenya.
According to financial results for the half year ended September 2021, Safaricom said that it held cash and cash equivalents of Sh. 26.4 billion. This placed its net debt at Sh. 50.5 billion.
Safaricom now says that it will convert its short term debt obligations to long term in order to manage currency risk as well as improve its working capital.
Safaricom’s debt might however rise further when it officially starts operations in Ethiopia. Safaricom hold a 55.7 percent stake in the Ethiopian venture, and is expected to make the largest capital contribution.
“To support the payment of licence fees for the telecommunications licence awarded to the Safaricom-led consortium by the Government of Ethiopia, we undertook a one-year bridge facility of $400 million (Sh. 44.8 billion) to finance this venture. We are currently seeking to term out the bridge facility through a long-term arrangement so as to manage our working capital requirements in the short term and minimize the currency risk for the dollar loan,” Safaricom said.
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Safaricom will invest an initial $600 million (Sh. 67 billion) in Ethiopia as part of its contribution to the consortium’s total investment pledge of $8 billion (Sh. 894 billion) over 10 years excluding the cost of the licence. The consortium includes South Africa’s Vodacom Group.
“We are expecting a capital expenditure of between $1.5 billion (Sh167 billion) and $2 billion (Sh. 223 billion) over the next five years to meet the licence coverage obligations,” said chief executive officer Peter Ndegwa.