Safaricom PLC (SCOM) Earnings Call Transcript & Summary

Good morning, good afternoon, good evening from wherever you are joining us from, and welcome to our half year '23 earnings investor call. We are glad that you are here for this session. My name is Caroline Wambugu. I am the Head of Finance, Planning, Analysis and Investor Relations here at Safaricom PLC, and I'll be moderating today's discussion. On today's call, we will have a short update from our Chief Executive Officer, Peter Ndegwa, followed by some remarks from our Chief Finance Officer, Dilip Pal, who will speak briefly about our half year 2022-2023 results, which we announced earlier today. Thereafter, both Peter and Dilip will address your questions with the support from the rest of our leadership team who are also on this call. Before we kick up our session, allow me to just speak to a few house rules. Please ensure that you have joined the session with your full names for ease of identification when you post your questions. If you haven't, you can rename yourself now by hovering over your name and clicking rename on Zoom.  Throughout this session, please share your questions via the Q&A tab. We will read this out later and have our leadership team address each question. Please leave a note at the end of your question with your organization's name as well. And in staying committed to our promise on diversity and inclusion, live transcript has been made available for the comfort of anyone with hearing difficulties, who has joined the call. You can access this by clicking the View transcript tab at the bottom of your Zoom application under more options. This will allow you to keep up with the conversation in a more comfortable manner. Finally, and in case you need any assistance from us, that is not related to the discussion at hand, you can write to us via the chat platform and the Investor Relations team will be on hand to assist. Thank you. Welcome to the discussions. And let me now invite our CEO, Peter to start us all. Peter, over to you.

Yes. Thank you, Caroline, and just confirm that you can hear me just for the benefit of the those who are calling in.

We can hear you, Peter. You may proceed.

Yes. Okay. So good afternoon, good morning, good evening, everyone, given we have various participants calling from across the world, and welcome to the half year results briefing. As Carol has said, we'll make some very brief remarks. Dilip who is our CFO, will give a little bit more information on the results that we announced this morning, which we released already on our website in terms of the detailed results, but also the investor presentation that we made this morning. Our intention this afternoon is primarily to respond to your questions rather than to go again through the material that we may have gone through this morning. But it's fair to say that the results are in the context of a rather challenging macroeconomic environment and an election period that we experienced in quarter 2 of our financial year, and we believe that we delivered solid results in that context in terms of top line. We also have flagged some impact of regulatory changes, especially the MTR from August, which will give a little bit more detail.  In terms of managing the P&L, we are driving a lot of effort to ensure that we manage the impact of inflation, which has been significant given the external challenges through our productivity agenda. And therefore, we will be able to give a lot more color in terms of understanding those results. From a portfolio perspective, we have seen, as we expected, decline in voice, but reasonably growth -- strong growth in data, but also fixed. The growth of M-PESA has moderated, primarily because of the ongoing election period, which we saw in Q2, especially in July, August and September. We saw a slight moderation in terms of consumer activity and given the level of certainty. And then the final thing I wanted to say is we've started to see the impact of Ethiopia. We launched commercial operations recently. And therefore, we factored in a lot of the initial setup costs primarily relating to network cost but also employee cost and also some of the funding costs that reflect within the Kenya business at the PLC. So Dilip will be able to give a little bit more color in terms of how that has affected our results. So that's all I wanted to say, but welcome. Beyond, of course, the commercial results that we have announced, we continue to be a papal business. We've supported community in particular, as there's a big drought, a function which I've just come from, hosted by the President to rally both development partners, but also private sector to support more than 20 counties, which is half of the counties in Kenya who are going to drought and farming. So Safaricom has been instrumental in orchestrating and in really leading the private sector in terms of an area that is very, very important to us because if our customers don't do well, business wouldn't do well. So I wanted to leave it there, ask Dilip to get into some of the shape of the financials and then go direct to Q&A. Thank you very much.

Thank you, Peter. Good morning, good afternoon and good evening. Caroline, confirm you can hear me well.

Yes, we can hear you well, Dilip. You may proceed.

Thank you. So my intention is not necessary to go through a lot of detail. We should use this time for question, answers. But as Peter stated that we have released our results this morning, and you have seen the numbers. But just to give you a little bit of more color to those, starting with the Catena Core, I think our headline numbers, as you have noticed, service revenue grew by 4.6% and adjusted with NPL service revenue grew by 5%. EBITDA grew 3.4%, EBIT grew 0.8%. And adjusted to the TR net income actually grew by 1.3%. As you all are aware, we have taken a loan in Safaricom Kenya books to support Ethiopia funding and the interest from that is also we book in Kenya books. If we adjust that, the increase in the cost, the net income growth actually normalized basis improved to 3.3%. From a revenue perspective, barring voice and actually acquiring voice, messaging and interconnect. We have seen growth in other lines. We have seen double digit -- back to double-digit protein mobile data backed by a significant increase in the usage and also improvement in ARPU.  We continue to grow our 4G base in our customers, which has grown now to 12 million, which is a growth of 24% year-over-year. On fixed, we have grown 50%. We have seen a good improvement in customer intake, resulting and also ARPU improvement resulting in the numbers, the 22% growth that we are seeing, we are -- we have about 46,000 home pass close to 0.5 million that we are expecting by year-end. On -- as Peter mentioned, M-PESA growth came below our expectation in the past and has been growing over double digit. And this year, we have seen a growth of 8.7%. While I'm sure you will have a lot of questions around it, but I just want to confirm that we have seen continued growth in balances and volumes, which grew by 32%. We have seen chargeable transactions for customer per month growing 16%, which is now to 2.45. We have seen overall portfolio of good growth is more towards the new satiate launch, while transfers and mutual grew by 6.7% -- the revenues line outside transfers and withdrawal grew by 13%.  We are also excited with the Super App. We have now 6.3 million downloads for the consumer app and about 500,000 for business. And we see active customers on those apps. And you may have seen from our presentation, almost 5% of M-PESA revenue came through our consumer Super App, which is about 3 billion. And what is more encouraging, the average number of transactions per customer in Super App is 39, which is much higher than the average of 22% that we have seen for the overall business. We have seen headwinds in voice. As you have seen, the voice has even declined by 3.8%. This is also a function of the macroeconomic factors resulting in efficient pressure leading to consumer wallet shrinkage and that's where we see the first impact of the macroeconomic factors. So voice revenue decline was mostly coming from that. But also, as you know, the voice revenue in any case was flat to a lower single-digit decline over a long period of time. Messaging are still declined, but I just want to highlight that what we have seen in the past of 15% to 20% decline, we have now seen a decline, but it's still high single digits than the higher double digit that we have seen in the past. And interconnect revenue, of course, is a decline coming from the NPR revenue -- NPL impact that you have seen in the first 2 months of the year, first half, we have seen an impact of about 470 million, which is booked in interconnect revenue. Direct costs up 4.7%, mostly coming through the M-PESA commission. We continue to see deposit volume growing -- growing even higher than the overall volume growth by 35%, and that's resulting in an increase in M-PESA commission reflected in the higher tariffs growth. Operating costs, the macroeconomic impact and the Russia-Ukraine war is resulting in a lot of the national pressure that we are seeing a major element of that is our energy cost, which has gone up significantly in H1 of the year. We have also seen the impact of currency depreciation impacting our operating costs on H1. CapEx, we spent about 18 billion and we did additional borrowing of 12 billion to take care of our working capital needs. On Ethiopia, I think Peter mentioned about our launch, which happened on 6th of October. I think we have shared some numbers. We are quite encouraged with the progress that we see post launch with 740,000 sign-ups so far up to October. And also, we are all encouraged by to see the level of activity in those customers. Almost 60% of the active customers are debt active, which is very positive. Ethiopia is reporting a loss of -- EBIT loss of about 7 billion, mostly driven by operating cost of 6 billion and depreciation of about 1 billion, which is what is reflecting in the EBIT decline that you see in the group numbers. In terms of CapEx, we spent about KES 19.5 billion financial in the H1 to our or rollout. In terms of coverage obligation, we are gearing towards submitting that by Q1 of next year, which I think I'm sure we'll talk about that later. M-PESA license, that's still to come, but we think we made very good progress, and I'm sure we have questions that we'll talk about that later.  You may have seen a revision in guidance, although the overall group level guidance remains same both the EBIT level and the CapEx. CapEx is actions for both Ethiopia and Kenya. But at an EBIT level for Kenya, there is a downside of about 1 billion on considered by upside in tea. The rationale for that is mostly coming from the sign posting that we have done during our annual results, that our guidance was based on the current macroeconomic factors and also the regulatory environment. So we have seen the impact coming through in India, and we also have seen the impact on the top line coming from macroeconomic impact that you have seen. So let me then pause here and back to you, Caroline for the Q&A. Thank you.

Thank you very much, Peter. Thank you very much, Dilip. [Operator Instructions] Having said that, I do see a number of questions. And the first one is from John Davis. John Davis of Bloomberg is asking, can you give a split for service revenue growth in Kenya between Q1 and Q2, please? Let me also read out the question by Rohit Modi of Citi. And then this, I'll hand over to you, Dilip, please. Could you give more color on lower EBT expectation in Kenya? What proportion of downgrade came from lower revenue expectation and what proportion from higher OpEx cost inflation, also, which are the specific cost items which you are seeing cost inflation, is it possible to provide item-wise impact. That is from Rohit of Citi. And back to you, Dilip.

Thank you. Thank you, John and Rohit. So on service revenue breakdown, normally, we don't provide a quarterly breakdown of our numbers. But in terms of giving you a color, I can fairly say that the Q2 service revenue growth was lower than Q1. We actually started quite well, and we -- and then we got into Q2. There are several factors, I think macroeconomic being one. I think there is other factors which is election. Peter mentioned about election impacting activities, business activities, which you have seen M-PESA coming down significantly during that period. So I think the way to look at it is, yes, the second -- the quarter 2 service revenue growth was lower than quarter 1. And on lower EBIT explanation, so 3 things, actually, without necessarily being you exact people, where is this 8 billion coming from. I think one element is MTR. The full year impact of MTR this year, just on a direct basis, which is the interconnect revenue drop is around 2 billion. Then we have -- as we have seen the revenue profile, we have seen significant pressure on customer wallet impacting our top line.  And also on the cost lines, I think the main areas of cost increase that we have seen from macroeconomic factor, one is in the energy cost, which actually consists of a significant amount of our overall network worth. Almost 50% of the increase on the cost line items are coming from -- in the operating cost line, at least, are coming from energy cost. So that's a substantial item. Then we have seen impact of currency depreciation, which is another 20%, 25% that also came through in our increase. And of course, there are other small elements, which are also impacting as a small businessmen are facing challenges, and we need to ensure that we are taking care of some of this in these difficult times. Without giving you a kind of breakdown of this, I think there are 3 impacts. One is on the NPL. Second is on the top line coming lower than expectation based on the macro-economic factors that we have seen now in coming -- having seen the H1 development and then the third element is on the cost side, but mostly in energy and the currency side.

Thank you, Dilip. Four questions following on here from Tracy Kivunyu of SBG Securities. And I read how do you see M-PESA usage performing in the second half of this year? The performance from second half of last year to the first half was quite slow. Do you expect a materially stronger second half, particularly in the traditional remittance business lines? The second question, the rate of active user growth on the consumer Super App seems to be slowing. What strategies are in place to improve this. Third question, without going voice revenue so weak in the first half of this year, do you anticipate further deceleration in the second half? What is your pricing strategy for voice in the second half and have you seen competitive pressure following the MTR drop? And lastly from Tracy, what did -- what did other OpEx and expected credit losses accelerate in past half? Let me just repeat that. Why did other OpEx and unexpected credit losses accelerate in this first half of the year? Dilip, over to you.

Okay. That's a lot of questions. Let me try and see -- Caroline, you remind me if I missed anything. And as always, Tracy comes with many questions. Let me start with -- Tracy, thank you for your questions. First one, M-PESA. So what I wanted to highlight here is underlying health of M-PESA business is very strong. And where do I get the confidence from? The confidence I'm getting is from the volumes and values of transactions growth that we have seen. While revenue grew 8.7%, the volumes and values grew 30%, which means that the ecosystem is growing, which is what makes us exciting that we can leverage, we can monetize from the ecosystem. Secondly, one key factors driving the volumes and values in the number of transitions, as I mentioned in my opening remarks. 22.45 transactions per customer per month is 16% growth over last year. And when you're discussing about last year, the same question came in that do you see still opportunity to grow in your transaction per customer per month? We said that pre-COVID, we were at about 10, which took almost like 13 years to reach where we have reached on M-PESA in 15 years of Safaricom's history, but it took just 2 years to more than double, and we see that growing faster. But what we need to keep it in mind is the newer services that we are launching, the monetization of that in terms of the revenue would be below than the traditional one, right? So as you see the proportion of the new business transactions, they are higher than the traditional business, that means the volumes and values will grow, but the revenue will come slower. But we are not concerned about that because we are adding more and more use cases for the customers to use more to enable us to grow that -- to grow the revenue. So I'm less concerned about the underlying health of the M-PESA business. I think in every parameter, whether it is growing customers, you've seen a growth in customers, you are seeing a growth in ARPU, and growing customers is something that comes as an easy opportunity, that questions, I think we have addressed by executing better in every single year. So we're growing our customers.  Then the other questions related to M-PESA to on Super App. I think on Super App, the strategy is around, as we are building more and more mini apps, how do we use data analytics to read data to monetize more and to create more customer engagement, so the customer stays within the app and they do the transaction. While the growth may be not to your expectation, but what we are excited about is seeing the number of transactions that customers do when they're in app, as I mentioned in my opening remarks, it's 3,940 transactions compared to an average of 22%, which means that there is more engagement that's happening. So with the enablement of big data at CBM and with the MAX coming through, I think we are very excited about that this enable us to grow the revenue.  I mentioned about 5% of M-PESA revenue coming to app is not a small thing. It's just about a year back that we have actually launched our consumer Super App. In terms of business app, I think it's more encouraging. You see the number of 500,000 downloads, 118,000 customers. And more important to the level of engagement, we see much better than the consumer health. So I think the strategy is to continue doing what we are doing, what we are good at understanding data analytics to drive engagement with the customers. I think in overall, still on M-PESA, we have quite a lot of new areas that you were in pipeline in terms of approvals. So at this point in time, I think we do have a few -- quite a few of those would be coming through M-PESA Junior or M-PESA as we call it, for 10 to 18 years of old customers, actually students. And then we have wealth management. We spoke about that in the past. So we have required approval for us to now launch it and you should be hearing from us soon about this launch. And we have also launched recently some of the other products that we spoke about, whether it is the M-PESA Global, the tie-up with Visa.  Going beyond the traditional financial services providing expanding the scope of this is what has been our main strategic ambition, and we are going towards that. So you will see we're talking about more about savings, with management insurance and insurance is team at Sensis, although you don't have the required approval to go to launch it, but that will also be coming to in the future. From a voice perspective, your question around deceleration in voice -- deceleration in voice, we are not surprised given the economic partnership that our customers are going through in terms of wallet [ tilts ]. And that we have seen many analysis that we have done on we segment our customers. We do -- we understand the impact they're going through and there's a lot of optimization that's happening. From our side, we are using our CBM powered by 3 different letter exactly the moderation of those customers who need sensor at this point in time, what kind of offers will enable them to stick to us and also which another them to use more going forward. So I think we are significantly enabling our big debt and CBM capabilities to ensure that the voice deceleration is lower than what we have seen in H1. But let's just accept that voice has been on a past what has been challenging in terms of the growth that we haven't seen, I think, has been flat to a low single-digit growth based on the trend that you have seen as well. So this is something that we need to deal with. But of course, combined with the economic challenges that we see for the deceleration.  On expected credit loss, I don't know anything specific other OpEx. Maybe my colleague can take that as an action item. But expected credit loss we have seen A few of our customers did not pay on time, and we needed to make sure that we provide adequately. And we understand the difficulties that respond that those customers are not using our services because they didn't pay within the time based on our policy, we needed to provide them. And also on our credit product, especially on the airtime, the product we call Okoa Jahazi, we have seen a bit of acceleration in the losses that we have in the first half of the year. But this is also probably a function of the economic difficulties that we have seen. But majorly, we see this is more of a timing gap other than a continuation of loss going forward. So let me pause here and Caroline, back to you.

Yes. Thanks, Dilip. Thanks, Tracy, for those questions. So I'll take another set of questions. One here from Modi. Modi of Citi asking, please, could you talk about news around splitting the mobile money business? What are the key challenges that you might see it happens? Will that have an impact on OpEx and CapEx levels in the future. And I'll combine that with a question from [ Maddy Singh ] of HSBC. Recently, there was some news around authorities pushing for a split of M-PESA from Safaricom. Can you please provide any comments how advanced are those discussions and how you'd think that would be negative or positive? So that is on the more mobile money business fleet. There's also another question here. This is to you, Dilip, the others can go to Peter. Can you please help understand the guidance? Why is EBIT loss expectations lower in Ethiopia? Is this because of delivery slower spend or that the actual rollout is costing much lower than your initial expectations? That is also from [ Singh ] of HSBC. Let's start with the questions on mobile money business to you, Peter, and then Dilip will take the one on EBIT guidance. Thank you.

Yes. So thank you. It's a great question. In terms of speed, I know there has been quite a bit of coverage on Safaricom and split between GSM and mobile money business. The -- our view is that we should keep the 2 businesses together. And that's what we've been guiding analysts, investors all along, and that has not changed. What we have done to do, and this is what -- and it is supported by the regulators, is we are going to create a group structure that allows each individual businesses to be separate businesses within the same PLC. And therefore, the listed business is the same. I think there's no question potentially that we give a little bit -- much better visibility to investors, much better understanding and greater forecast. But I should say that internally, those businesses operate separately. So the M-PESA business operates as separate teams.  So this is actually internal organization that we need to do to ensure that we can fit it within our group structure, but continue to collaborate in the same way that we collaborate today, but with more formalized structures. So that in future, if there is an intention to say there is money, kind of co-invest with others, then it is easier to deal with that. But it is not about completely separating the mobile money business from the connectivity business. It is about creating a structure that allows each of the individual businesses to be seen separately. I think there has been the kind of misunderstanding about how we are regulated. Some of the parliamentarian said, it will make it easier for the regulators to regulate Safaricom if the businesses were split. But today, the Central Bank regulates Safaricom's Mobile Money business and the communication authority regulates the GSM business. So there isn't any doubt as to who -- because the licenses are issued spectrum is issued by CA, the licenses for mobile money are issued by the Central Bank. So that doesn't prevent us from continuing to be regulated by different regulators.  So that is where our position is. And we are currently undergoing that. There is clearly quite a lot of work to do in terms of tax and regulatory -- tax and legal structure that would need to be overcome, in particular tax because the current tax law almost treat internal organization as if there was external -- I mean, disposals and so on and so forth. So we do need approvals if we are going that direction so that we don't have to pay VAT or in holding tax or whatever in order for us to be able to reorganize the way we intent to. The Board has not approved and given us directionally support for that process, but eventually, we would need all the support from the government in terms of tax release and so to be able to go that direction.

Let me let me take the EBIT guidance on Ethiopia. So the reason for upside in it is mainly coming from -- 2 reasons. One is a bit of a slower pace on the rollout that we originally anticipated, the number of sites that we are planning to roll out. So that's coming slightly lower. And also within that, the mix of our own sites versus the sites that we were planning to take from Ethiopia that also came slightly more in favor of our own site bills. So it's more of a safe timing issue. And also, there are some costs that we originally planned and come through, but I won't consider that material, but it's mostly the cost that we -- that came through as a lower because of the rollout more this mix as well as the number of sites. Back to you, Caroline.

Okay. Thank you, Peter. Thank you, Dilip. Next question here from Silha, Silha Rasugu from EFG. I'll read the fast 3 and then we'll tackle the next 3. So the first question, and this goes to Dilip. In this consolidated numbers, the effective tax rate has increased to 37%. What are the drivers of this? And how should we think about corporate tax rate for the group going forward? Question number two, any indicative time lines for the mobile financial services license in Ethiopia. And question number three, which is actually tied to question number two, loss from associates and JV has declined in the first half of this year. Could you give us some detail on performance for M-PESA Africa? What would be its role in Ethiopia? And would this move it closer to profitability. Over to you, Dilip.

Caroline, can you repeat the second question again?

The second question is on the time lines for the MFS license in Ethiopia? Any indicative time lines.

So let me start with that first. On time lines for M-PESA, what we have -- what we're saying is there are steps towards getting a license in place. And within these steps, I think one important step, which is still pending is the parliamentary approval. Beyond that, the committee has already looked through this to allow foreign investors to come and invest as a foreign investor in the mobile financial services space. So that's -- the work from the committee was done. So it's now this needs to be approved in the parliament, and that's what is waiting. But as you have already seen from the public announcement, -- we are expecting a license soon as based on the parliamentary approval process. But I think the other part is also how we're allowing us is to prepare for the launch as soon as we have the license. I think that's the work that we are thoroughly doing to make sure that our ability to launch in time, we can do it pretty fast that we are not waiting sequentially to create those capability and able those creation of the product and services and platform and technology side that we are currently driving. So it's not necessarily a date that we can provide, but we believe the hurdles that were required to be concluded, actually, we made very good progress on that. We adjusted the last leg of that approval.  On your question on effective tax rate, depending on how you're looking at the group numbers, you can -- maybe the better to look at the Kenya profit before tax and the profit after tax and therefore, the effective tax rate rather than a consolidated number because the tax rate on consolidated basis from Ethiopia is not necessarily impacting. It could depreciate your numbers because you have a profit before tax, which is impacted by the Ethiopia number. But having said that, I just wanted to highlight that there are these sellable expenses that you consider while creating the effective tax rate. I think maybe my team can guide you separately what should that effective rate to be considered on a steady state basis. On loss from JV questions. Yes, we do report numbers from one JV and 2 assisted companies, JV, which is NPA, M-PESA Africa and 2 associate companies, one is Saket and other is a company called Teams. So what you've seen is compared to last year, the losses from those entities are going down, including M-PESA Africa. So that's what is reflected in the numbers that we have reported. From a roll of M-PESA African Ethiopia, that tool is no different than the role that they play in Kenya as all of you are aware of. M-PESA Africa mandate is to develop products and platforms, which can be rolled out across all markets. And as part of the Ethiopia's, capability that we are building as a state that as we are waiting for the license to come in. So there is a lot of work that's going on providing those -- creation of these production services actually supported by M-PESA Africa. So that's how they operate and the M-PESA Africa will come in and make sure that the one product, which is launched in one market and can be dice across all other markets that you operate in M-PESA. Yes. So first 3, I think I have answered. Now Caroline, the second part?

Yes. The second part is as follows. Question number four, could you please elaborate on the jump in receivables in this first half of the year. And then on expected credit losses, how much is due from Telkom Kenya and how does Safaricom think around competitive dynamics in Kenya now that Telkom Kenya's ownership has reverted to the government. And the sixth and last question from Silha on M-PESA, what is the proportion of chargeable transactions to the total transaction volumes?

Let me start with a jump in receivables question. So we -- I think if you're referring to last year's versus this year. So we had -- actually, this is coming from a pre-payment. Last year, we paid for our CA deals post September, and the amount is about KES 7 billion. But this year, we paid within September. That's basically a timing issue. So it's not necessarily -- but other than that, I think we have seen some increase coming through on our Lipa na M-PESA device receivables, but that's fair because we are also driving our growth in devices. As you have seen, we have brought in quite a significant number of 4G devices in the system, and part of this is also driven by Lipa na M-PESA. So that distribute is also reflected. On your questions on expected credit loss, yes, we did book expected paid loss on account of Telkom Kenya as well as there was a delay in recovery of current use. The total amount receivables from Kenya is actually substantial to Telkom Kenya users over KES 3 billion, and there is a large amount of that is past dues that we're dealing with separately, and then we are trying to make sure the current dues are up to date.  Yes, we are in discussion with them and also with other stakeholders to see how we can fast-track this recovery, but as you are aware, they are also suffering a lot in terms of their cash, their ability to pay us to pay. But this is something in our radar, and we are watching pretty closely. So in terms of proportion of -- I think the numbers that you report, approximately 20% of our transactions are still free on account of that bank-to- wallet and wallet-to-bank that continue to be free. So I hope that answers your questions, Silha.

Thank you very much, Dilip. So thank you so much for your questions. Once again, I see questions here from [ Sam Griffith of Faida ]. And so we will take 3 sets of questions. So question number one from [ Sam ], why has revenue growth of M-PESA -- Why was revenue growth of M-PESA so much lower than value and volume growth? Is there a product mix impact? And if so, which products? And then the second question, once again from Sam, can you provide the growth number for the M-PESA float year-on-year? And thirdly, from [ Singh ] of HSBC, M-PESA transactions value as a percentage of GDP is tracking at what levels in the month of October? I remember it was about 200% during second half of last year. So those questions to you, Dilip.

Okay. I think on the first one, the revenue growth is slower compared to the volume growth. First of all, I think the first data point is that our quarter 2 revenue came much lower than the quarter 1 in M-PESA, and while overall revenue quarter 2 was slower than revenue growth in quarter was lower than in quarter 1. I think for M-PESA, it was even worse. And I think I mentioned about the impact that we have seen before election, during election and after election and over a long period of time, the level of business activities came down significantly. And that's why you see a slowdown because in the past, I think in a normal situation, you've never seen a single-digit growth in M-PESA and it's purely on during that period when business activities came down, we have seen a slower growth in M-PESA. But let's also accept that M-PESA is not -- M-PESA actually reflects what consumers are spending and the market. So the macroeconomic factors, while the consumers are prioritizing and there -- you see that happening when they are going to a supermarket, the same amount of money they're spending, they're getting lower. So there is an optimization happening from the consumer side as well. So that we cannot -- I cannot quantify that, but that impact is also factored in here.  To your question on why the growth in volume value is not reflected in the revenue growth. I think it comes from -- the answer would be in 2 parts. One is, remember, I spoke about the deposit growth, which is still 35% year-over-year in the deposits. And if you go back to the pre-COVID period and where we are now, I think the deposit alone has probably grown by threefold. And remember, the deposits that come to our wallet, there is no monetization. The monetization comes later on. And there is one chunk of that monetization is missing today which wallet-to-bank and bank-to-wallet. Sorry, the wallet-to-bank, which we earn our revenue from. And I mentioned about that almost 20% of our overall transaction is free and that the monetization is missing on that.  Beyond that, I think there is one more element that you need to keep it in mind as we are getting more and more into new growth areas within M-PESA, the rate of monetization would be low, but there would be -- there would still protect margin because cost of delivering those are lower. So it's a scale that you need to operate, and that's what we are exponents we're excited about the volume because we know that, that allows us to gain that scale. So it's not necessarily mix issue, mix issue in a sense that that's the business that we are pushing where in these new areas of growth, the transactions are actually growing faster than the traditional business, which is transparent with jewels. And that -- I think we have even showed one chart where you see that the gap between that is now growing. And of course, which means that the newer business will contribute more to our growth going forward than what has done before. Now the other 2 questions, I would floating you can take that as I don't exactly remember the number, I don't want to put a wrong number on this. And GDP contribution in M-PESA, the numbers that probably we have spoken about is around 50%, 60% of GDP that goes through as ecosystem. So I'm not sure about 200%, maybe there is a way that you are calculating, but I'm happy to engage with you and Caroline, you can take that as an action item, whether there is a way that was calculated differently than the way we calculate.

Yes. Thank you very much, Dilip. Yes, we'll reach out to you [ Sam and Singh ] on those 2 areas so that we can engage further. Allow me to just quickly revisit a question I think we did not completely address from Silha, and this is to you, Peter. How does Safaricom think around how does Safaricom think around competitive dynamics in Kenya now that Telkom Kenya’s ownership has reverted back to the government, Peter?

So yes, good question. I think we're asking ourselves that question ourselves. But in our view, on a more serious note, in our view, nothing has changed because the assets that Telkom can owns haven't changed the team our business. They have a strong fixed business and the enterprise business that primarily results the public sector. They are assets that we've always been interested in, but given the size of Safaricom, we know that it is during the whole merger between Airtel and Telkom Kenya, there are some assets which we know would be attractive. So if Telkom Kenya was selling assets, we'll be interested. But given that they are going concern, we need to wait for see how government wants to think about Telkom Kenya's future and how they want to run it into the future. But as far as the commercial aspects of the business are concerned, we haven't seen any change yet. I think it is whether the ownership of the Telkom Kenya will change because we do not believe that the government intends to run a commercial telecommunication organization. So should that change, then we will see what's the effect of that in terms of whoever comes -- wherever is the future owner of Telkom Kenya. So -- but at this stage, we see them as status quo. We interconnect with them. We're working the same we were working before, and we are waiting to see the direction that the government takes.

Thank you so much, Peter, for that. So I'll read the next set of questions. These are from [ Lynette ] of ABSA Securities. First question -- and these questions will be to you, Dilip, sorry, the fast 2 and then the next in the next cycle. So guided by the full year CapEx estimate, Safaricom's first-tier spend is around about 38%. What will be the catalyst for CapEx ramp up in the second half? And then the second question, please give more details on CapEx funding option. Might we see the first half short-term debt refinanced by longer-term auctions? And what is the targeted currency split, Dilip?

Yes. So I didn't necessarily get the question on currencies, [ Lynette ], if you can back it down once again so that I understand it better. But the question on the CapEx, very good question, [ Lynette ]. You're right. I think the first half, first 6 months of the current financial year, we are about 40% of the full year CapEx guidance. I think on Kenya side, we -- it's normally if you go back historically, you will see typically some of the delays that happen, it gets ramped up in the second half. So I'm not -- this is not necessarily a very different profile than what you have seen from the Kenya side in terms of the number that we are projecting about 40 to 43, we have spent about 18 billion. So that's not necessarily a very bad outcome. But on the Ethiopia side, probably, that's where you might see the spend on the first half is about 19.5 billion, but then there's a lot that's coming in the second half of the year.  And this is actually driven by the pace at which we are now rolling out. Remember, we had quite a few headwinds that we're dealing with in the first half of the year in terms of the -- just the -- getting all our vendors, the suppliers, the major vendors to a speed, around the speed that they need to get into, which took time. So the ramp up to time and some of the vendors did not necessarily get into that level as expected. So that took a while. Second thing is on the speed at which the Ethiopian sites that were coming was also not the coming fourth and you'll recall that we -- it took a while for us to conclude the agreement and therefore, there is a time line by which those sites come to us knowing very well that there are upgrades those required in those sites. I think there is -- that's what I said is also linked with I think the one question that came in that our cost came slower than what we originally expected. So our expectation now, given that we do have coverage obligation to complete by first quarter of next year, we really need to get our roll out much faster than what we have done in the beginning of the year. We do see that happening as we speak, and that's what is happening for the Ethiopian. I think that's probably making that ratio, it was. But I think that's how we are thinking. But it is fair to say that probably from a -- I mean, we'll see how things lend up, but it's unlikely that we'll be at the higher end of the guidance. So that's just for the information. On funding, Ethiopia -- majority of the funding has gone through equity and then followed by vendor financing. And that's now -- you'll start seeing that in the liabilities that's also building up in the Ethiopia balance sheet. And third element is local currency funding, and that's also beginning to show up -- just in terms of local currency funding in Kenya shilling terms, we do have end of September, about KES 6 billion equivalent in local-based funding that we have used. So a combination of all these 3 is what has helped us the funding of our Ethiopia operations. I think going forward, as we mentioned before, you will see probably more external debt coming through. And the public announcement and other conversations that you've had around our FT is geared towards that. So you'll see more and more debt coming in Ethiopia operations in future and less equity, I think it's only the gap that we'll not be able to fulfill through debt and also keeping the covenant, the debt equity that is required for Ethiopia, we'll meet that equity, but the focus is more on managing that to more one and external coming for Ethiopia operations. I think I will wait for your understanding of the other questions on the split of currency other than that Caroline, I answered the other 2 questions.

Yes, you did. Thanks, Dilip. So the next 2 questions once again from [ Lynette ]. So the third question here is Safaricom Ethiopia offered discounted rates in the first half of this year, which is making reference to the welcome offer. So the question is how long will these rates be applicable for? And by how much will the tariffs be increased after the offer expires? And then lastly, her question is on CapEx again on Ethiopia. Management's targeted USD 1.5 billion to USD 2 billion spend in Ethiopia remains unchanged. However, Ethiopia's full year '22 and this first half CapEx has fallen short of the targeted spend. So should we assume that the annual CapEx over the next year, that is FY '24 to FY '26 will be higher than the currently estimated CapEx number of KES 60 billion. Dilip, over to you.

On the discounted offer, as you know, these are always promotional offers. So promotional offer is always for a limited period only stand at the customer. And as part of our special launch of , we have given certain minutes, certain megabits and certain SMEs. These are -- these basically lapses after so they need to use it in 1 month. So to them your questions around these. So there is the commercial that we are running actually commercial propositions for our customers that they are buying those bundles when they finish their either the time or finish using their promotional offer. So it goes hand-in-hand. And of course, given the launch and special promotions that we need to do, so we continue doing that, but it is for a limited period for customers to use and then move into the commercial bundles and other services quickly.  On CapEx, no, [ Lynette ], it doesn't change. First of all, that 60 billion CapEx that I think we're talking about referencing FY '23, I think we did mention about this before. That's why we gave a broad number or so any catch up slower in 1 year will be definitely made up in subsequent years. So we don't expect that 1.5 billion to 2 billion numbers to change. But within that could change year-over-year could change. So -- and of course, for FY '24, when we guide, we'll also talk about what does it mean in FY '24, but that's for later not today.

Can I add just a couple of comments to what Dilip said, especially on the Ethiopia welcome offer. I think it's important to understand, given that we are now the first second player in the market, customers are starting to learn to have dual saves and to have an alternative provider. So one of the reasons why we give that welcome offer is so that customers can experience our network, customers can start to understand what it means to do cross network costs rather than just being in the same network, which we need to educate customers because the charges would be different depending on what the interconnect is. So our intention is making sure that we track that customers are recharging, so that they are coming back after they exhaust their welcome offer, especially on voice, which is very important.  On data, it's less of an issue because we have 4G everywhere. Our customers are using -- the penetration of data is pretty strong. And therefore, we knew that there's a lot of litem demand that will not be fulfilled because of the quality of network and also some of the propositions that are in the market. From a pricing perspective, our pricing strategy is generally to be either in line or just slightly premium, but not to go for any price competition. I know that when we announce results today, there was a journalist who asked us or rather, I think there was -- I think it was a journalist from Ethiopia, who felt that customers were expecting that we would discount quite significantly against the Ethiopian pricing, but we clarified that the intention is actually generally to be closer to what the main operator is offering, especially on voice. So we -- I think the key is we will learn as we go. And by the end of the year, I think we'll have enough plan is for -- to develop more tax to investors on how the customers are receiving or the propositions, but also the experience.

Thank you very much, Peter, for that addition, and thanks, Dilip as well. Peter, a question for you here from Solomon, Solomon Kariuki of AIB. With bank to M-PESA transactions growing 3x, do you feel the need to pursue the regulator for reversal in the earlier guidelines that removed Bank to M-PESA field? Peter.

Yes. So the bank to wallet and the wallet to bank 3 transactions was never expected to be permanent, and that has always been the understanding with the regulator. We dealt with that with a bigger matter, which was the P2P, which we went back to charging at a much lower cost. So we expect that in time, we will have wallet-to-bank and bank-to-wallet be charged. But we believe that to be at a much lower cost. And we're already having conversations with the industry and the Central Bank to see how that evolves. So clearly, you can't have a franchise that's free because that is important that we continue to maintain a franchise. The second is, we are now the biggest ecosystem, collection ecosystem for the country and for banks, and we pay commissions to agents for deposits, which is what eventually flows through in terms of wallet bank. So it is important that in the end, you still have a future fruit charging system that allows us to make sure that ecosystem -- the economics of the ecosystem are right. So we do expect at some point, we will go back to charging because it was most expected to be permanent.

Thank you, Peter. Dilip, I have 3 questions for you that were posted on the chart. One is from Solomon Kariuki, once again of AIB, and it reads as follows. What informed the jump in short-term borrowings while finance costs remained flat? Are these borrowings working capital related and how much of it is in foreign currency? And then another question from, I think that's [ Danish ], yes. Is the decline in voice revenue more linked to cannibalization from data, (OTT) versus elections, is a decline in voice revenue more linked to cannibalization from data versus elections? And lastly, the question from Samuel Njihia of Renaissance Capital. He asks, Safaricom recently lowered rates on Fuliza. How are transaction volumes trending and do you expect growth in transaction values to overcome the lower tick rates on Fuliza?

Solomon, I think your question around what the jump in borrowings, these are short-term borrowings, and I can confirm you these are short-term borrowing and also in local currency. So there is no hard currency borrowings that we have taken in this first half of the year. Dennis, to your question on cannibalization and whether it is linked with that more than the other things, no. So cannibalization, Dennis, is not new. I think that's been going on. And we think in our previous engagements, we have always highlighted that as per global trend, voice will be under pressure, but we are trying to still defend our share to make sure that an important sense is like voice, the pace of decline is lower. And we said that the expected -- the voice is expected to decline. And what you have seen in the first half of the year is the rate of deceleration is much higher. And our assessment and our base now and less is what we have seen actual customer behavior, it's more coming from the macroeconomic factors rather than anything else and also the disruption or slowdown in activities that we have seen during election period. So there is a natural cannibalization that's happening, but the 3.8% decline is not coming from that.  The question on Fuliza. If you are -- I mean, this is a very good question, and this is a very important question to reflect as we're reflecting on our price changes or price optimization what we have done from January 2021 when -- sorry, January 2020, yes, January 2021 when we brought back the P2P charging. And you would recall those conversations around that time when you are releasing our H1 results, there is a similar conversation that when we come back when the prices are restored, what will happen. I think what we have seen is that -- the elasticity on usage is always that the volumes -- this transaction is always higher. And I really cannot comment on just -- this is just about 1 month now for me to give you any color to what we see. But our expectation is that as we see the customers see more values, customers sound actually the way if you're seeing the optimization, the price, many customers if they are repaying within 3 days, they are just paying the upfront fee and not paying anything party charges because first 3 days are free up to a certain value of the transaction. So -- our expectation that it always allows customers expansion of more users, more full customers coming through, and therefore, improving the volumes and values. But we have to wait and see how the second half of the year when you see the impact coming through that pans out and we'll, of course, ready when you release our full year results. I don't know whether -- Peter, do you want to add any more color on the Fuliza conversation?

Yes. I think probably the more -- beyond the answering the question, one of the key elements that we've been considering is from a sustainability perspective, the perception of the product having been seen as expensive in the past was not good in terms of seeing this product as sustainable. So we believe that we've now gotten to a good place where 2 things we achieved. And that's one of the things that was not happening before. One is Fuliza starts being used for the purpose it was created. -- which was emergency credit, not a term loan, whether that term loan is for 7 or 14 days. We realized the duration in which most people are having Fuliza was between 10 and 15 days, which is too long for an emergency credit. And therefore, that's why we said let's put the front end, especially for small amounts below $10. The front end is free for the first 3 days so that people use it properly for as emergency credit. And therefore, it's more sustainable for that use case. And if customers want tumbles, we will, as much in credit in future, be able to provide propositions that meet the needs. So customers want tumbles that are built during 7 days. So the sustainability of the product for us is the most important rather than necessarily whether the revenue considerations in the near term affect the profile of that product. But we believe as Dilip said, the need is there, we will wait and see, but we believe that the elasticity is strong enough to bring customers in, if it is used for the right purpose.

Okay. Thank you very much, Peter and Dilip. Let me take the next set of 3 questions. One is from [ Francis Mwangi ]. Please share more details on how you see funding for Ethiopia's OpEx and CapEx spend over the next 5 years. [ Francis ] maybe just to let you know, this information is part of what was shared this morning through the earnings release. So you'll find the CapEx guidance for Ethiopia for the next 5 years in the presentation. It's $1.5 billion to $2 billion in the next 5 years, and we don't give a guidance on OpEx. So allow us to just close that on that one. There's a question from Lucy Odhiambo. Lucy is asking kindly provide a guidance on Safaricom Ethiopia's full year's network operating costs, considering the significant impact on group network operating costs since launch. Lucy is with Dyer & Blair. Provide a guidance on Safaricom Ethiopia's full year network operating costs, considering the significant impact on group network operating costs since launch. Let me give you this one as well from [ Mike Stere ]. Please, may you provide guidance on the capital intensity of the core telco business versus M-PESA. Dilip, if you could kindly take those 2 questions.

So Caroline, I think you answered the first question when you say that we don't give guidance on OpEx. So that I think -- I think the way to look at it is, if you look at FY '23 guidance, Ethiopia we have revised our EBIT guidance from a previous loss of 30 billion to 33 billion to now 22 billion to 25 billion. And that actually represents all the costs that we are incurring in Ethiopia, including network operating costs. And one is to -- I mean, you have to actually assume that network operating cost would be an important cost element in Ethiopia, given that the rollouts are happening and other costs are picking up. So I think that is where I will leave it here because we don't necessarily give a separate guidance on OpEx other than on EBIT.  On CapEx intensity, yes, I hear you. So I take this as an input that in future or that there is an opportunity for us to now keep intensity by business. We haven't done that before, and we haven't considered that also as part of our guidance. But I get what you're trying to achieve. But it's fair to say that telco-intensity would be higher than M-PESA, I assure you are the same, but we just don't calculate it that we don't guide that way to the market. So we haven't done that. But I think that as a duplex whether we can provide it in the future.

Thank you, Dilip. The next set of questions. I have a question here from Ali. Ali is with the FIM Partners. And Ali, thanks us for the call, but also has a general question, and he does ask, in the case, there is a split of GSM and M-PESA in the next few years, how does management think about preserving shareholder value to ensure the split does not create a cash flow or a valuation drag, particularly on M-PESA. I know this has been addressed partially before when we talked about the split of M-PESA, but maybe I'll just request Peter, maybe if you could just share a few thoughts on that. How does management think about preserving shareholder value to ensure that the split does not create a cash flow or a valuation drag, particularly on M-PESA in case there is a split.

I think this is a CFO-type question. But anyway, I think the way we look at the question about how we are organized is to create better visibility of each of the individual business, whether that is M-PESA at our company, the GSM business and any other subsidiary, including the Ethiopia business as separate subsidiaries within the same PLC. Of course, the actual relationship between the subsidiaries or rather between the businesses, will retain -- will be housed within Safaricom and the benefits, the benefits will continue to approach to those businesses only now that they will be more formalized. I'm not sure about cash flow piece is because we are not splitting and separating the businesses in terms of external high folks or anything like that. And that's also one of the reasons why we are seeing there are some tax considerations to be overcome. So that is an internal reorganization rather than kind of a permanent high lots of businesses. So if there is any issue with respect to how it affects shareholder value, we would only do -- we don't make the decisions in the best interest of both shareholders but also how customers and regulatory constraints allow us to do. So Dilip, if you have any other comments on that, please do.

So the intention is not to do anything which dilutes the shareholder value. I think intention would be always to protect shareholder value and so Peter you have covered well.

Thank you. Thank you very much, Peter and Dilip. Thanks for that response. The next set of questions, one from [ Faruk. Faruk ] is with the All Africa Partners. He asks which segment, voice or data or mobile money do you think is most exposed to slower growth if inflation continues to grow and macros remain weak, and how is inflation impacting salaries at Safaricom and pricing strategies. That's to you, Dilip. But take together with this other question from [ Sam. Sam Griffith ] asks, have you opened up the M-PESA app to third-party developers yet? If not, when do you expect to? Dilip.

Our view is that the inflation and therefore, consumer pressure impact pretty much all segments. So nothing -- I can't say that one is protected. But again, if you have to do a kind of a waterfall, which gets impacted fast and then what others, I would say voice probably is the one who gets impacted first. Remember, we do have a lot of voice-only customers and in the segments which are greatly impacted, the first thing they will try and optimize their spend, and the voice gets the first hit and then probably followed by mobile money and data. I think the users of data probably are in terms of inflation, the ability to extend that. I'm not saying they have that fully, but it's probably higher than the only voice users. Mobile money, yes, it does impact. Remember that we are -- when you have less money to spend, and that's where our whole ecosystem touches where the money is flowing, money is moving across the ecosystem. And if there is less money to spend, it does impact mobile money. So I have to say that all business segments, what is in the voice and the mobile money does impact, but in terms of most impacted probably is starting with voice.  On salaries, I don't know what exactly the question was. Yes, we do pay salaries to our employees to have annual review that we provide that we go to a proper benchmarking process. We have just to inter-organizational going into agile. And therefore, there are ways that we assess our employees based on their costs and based on their contribution. And based on that appropriate compensation is given. And I understand that maybe your reference to whether inflation does impact the salaries. Yes, it does. That's also part of the benchmarking and the considerations that we go through when we do a reduce of employee compensation.  On the pricing strategy, Unfortunately, probably that's where we have -- we -- the telcos are more constrained in terms of when your inflationary pressure, you see that other industries are able to increase their price. But I think the expectation from telcos is that they will not be able to increase their price, mostly in the frontier and emerging markets where the impact of inflation is much more in the consumers' wallet. You probably hear that a bit in European markets, some of them actually European operators have increased their prices, but that's not necessarily has happened here, and thus, I don't see that happening just because the inflation has gone up and the pricing -- but then the way you structure your offerings, the way you give your customers offer, there is a lot that goes into understanding who are the most vulnerable customers and who are not so vulnerable so that you can customize your offers and promotions accordingly, that's what you do.  On San's question on third party. We do have about 50,000 -- over 50,000 developers they build solutions in our platform. And to your question on whether the Super App will be added to that I think the way the Super App is coming in is coming -- the mini apps are coming. So mini apps are the as of, for example, mini app of one of the supermarket or a ride share will come in, and it is an opportunity for the developers to develop those in those -- in that context rather than developing it here. But maybe this is something for our team to look into it, whether there is an opportunity for third-party developers to come and develop in our Super App. But right now, it's not there. But they're coming -- develop a lot of solutions for businesses. As I said, more than 50,000 developers, they are actually working in our platform as we speak today. Back to you, Caroline.

And Caroline, can I just add a couple of points. I think on the question of the businesses being impacted, when one of the ways we look at impact is also to do some studies and to interview customers to get these [ subsidence ], to your customers and say, how are they reprioritizing their spend depending on the categories that they actually buy. And we've been doing that for a while. So that's the way, first of all, we keep in touch in terms of -- because communication is still very important for customers. But if you think about one of the dimensions we think about which is the most mature product that customer can do without and voice is one, which is what Dilip said. I think there is still a lot of headroom to grow the amount of data that people use. And in fact, one of the constraints is the type of handset they have. So as long as you have the right handset, you can always use more. And you've seen close to 70% increase in the usage of data. And that also has allowed us to reduce price by about 30%. So the economics of data still have a lot of headroom as long as consumers continue to use more.  And we have corrected remember that our business, given it's been premium price to corrected versus competition quite significant, especially on the digital side, we are closer to where the rest of the competition are. But on voice, we still have a premium. So therefore, when you think about trade-offs between us and competition, the voice will tend to be more affected than data where we are closer to where the rest to the market is. So I think those are important considerations. On the investor side, it is more the traditional services like withdraws and P2P, and that's why increasing the way the franchise is used. So the wallet bank increasing and so on is very important and actually growing the use cases that customers are using on M-PESA allows them to trade off against various components. So they are seeing it as one holistic offering rather than specific services that they are deciding from our business.  And then on cost of employees, which is the other comment I wanted to make, given that we are a technology and fintech business, traditionally, you would -- our churn rate in terms of employees leaving the organization is very low. However, we have seen a lot of attention being placed by various players in the market on great talent on the tech side, on the fintech side. And therefore, we've had to significantly upgrade salaries or significantly increased salaries for those types of skills. So yes, we have seen significant inflation on those types of skills, more to protect, but also to ensure that we keep and maintain those people within the organization. And that also has -- that clearly has an incretion impact. But generally, overall, employees, we do benchmark and ensure plots are hitting the benchmarks that we want.

Thank you very much, Peter, and Dilip for those responses. Let me take another set of 3. And just to let us know, I can see we are 2 minutes to be appointed time in terms of what we had allocated for this session. But we shall request that to indulge us, maybe we can go another max 10 minutes, just to be able to address the remaining questions that are here with us so that we give you full value for the discussions we are having this evening. So a question here, actually 2 questions from Ali. Can you remind us if the Ethiopian's MFS license is embedded in the license you already paid for or will that require another payment? And the other question from Ali is finally, how will rising interest rates change your payback period expectations for Ethiopia, if at all. And lastly, another question from [ Sammy ]. And these 3 questions, I'm assigning to you, Dilip, kindly comment on the share price and dividend policy. That is from [ Sammy Kibet ].

Ali, the first question on whether MFS license was embedded in the license that was awarded to us by Ethiopia, the answer is no. The bid was for a GSM license and it was very clear that there will be separate process for NFS license, and that's what I think we are discussing, and we are also giving you update. The process for issue of that license has progressed very well, but there are 1 or 2 stress tests to still to be concluded, including if there is a price to be paid for that license fee and the terms and conditions of that license that we have now concluded it was not embedded as part of Origin he GSM license that was issued yes. Interest rate, yes, we do simulations on interest rate and the impact on payback period. At this point in time, there is -- there is nothing that we need to alert you that it is changing. It is still within the range that we are expecting. But this is one area we need to very, very carefully how these plans are over a long period of time. Is this something going to be sustaining for the long term? Or is this going to cool down in some time to come. Share price, dividend. So we mentioned before, there is no change in dividend policy, including a consideration of an interim dividend that we normally discuss during January, February, once we have a visibility of our full year's net income that would happen, but we can and that, of course, is a board matter and will be discussed and agreed and we, of course, inform you appropriately. But as far as the policy is concerned, it has not changed, it's still 80% of net income of the consolidated net income, excluding minority interest, that become -- that would be part of the consideration for the dividend payout. On share price, if your question is on the share price I don't know there is -- the question is around Ethiopia's share price decline? Or what is that I am supposed to comment on share price?

It's not very specific, Dilip. So maybe I'll ask [ Sammy ] you can get directly in touch with us through our Investor Relations address, we'll be able to address that for you. But at least the dividend policy, please, I'm sure you've benefited from the response. So Dilip, now that I still have you, let me give you the next 3 questions. I have 3 questions here from Lisa Kimathi. Lisa is with SIB. What was the source of revenue in Ethiopia, especially since there was a free welcome package. Then the next question is what led to the increase in handset costs? Is Safaricom Telkom's Ethiopia selling handsets in Ethiopia? If so, how profitable has it been? And by your estimates, is each of your customers buying a handset. I think I'll like to take those 2 and then the third one I'll give to you, Peter. The new government in Kenya has come in with new targets, some likely to impact Safaricom, for instance, expanding fiber optic reach, affordable credit, affordable data and costs, local manufacturing of phones, et cetera. How does Safaricom intends to take advantage of the opportunities or shield itself from potential risks. I'll request Peter to answer that after Dilip has taken the other questions from Lisa. Dilip, over to you.

On source of revenue of Ethiopia, in case you have seen our presentation, we have reported a revenue of 98.3 million total revenue as on September, 98.3 million, out of which 9.1 million what you call the service revenue. And the difference between the total revenue and service revenue is mostly the device revenue handsets that is still that we book as a enteritis portal revenue. And service revenue is voice and data. And I think in the presentation, you would see that our almost 50% to 60% of our customers who are using voice, who are using voice are also signing for data. So that's very positive. So it's a mix of -- we don't have the split yet, but in the future, of course, is also split it in between voice and data for Ethiopia. Now to your second question on handset cost. Yes, the cost is mainly on account of the handsets that we're selling, I think we have reported that number as well and the number of handsets that we have seen. This is a key part of our strategy driving digital ecosystem in Ethiopia to allow affordable handsets in the hands of customers, affordable 4G handsets in the hands of customers. So we are seeing actually a very good traction. We have reported some number as at end of October, actually, we have sold close to 30,000 handsets. So the numbers are smaller. I think half of that would have come in by September, what you have seen in the handset costs that we have booked. And I can confirm you that we are not subsidizing on the devices. There is a direct demand for devices in the market and that we are fulfilling. And we are not subsidizing that. Peter, if you can take the third one.

Yes. So the question from Lisa is a critical one, the one on the new government, and we see it in a very positive way because we see a lot of the areas. So the new government has made ICT and Fintech central to how they want to achieve their social and economic agenda from a manifesto perspective, but also start to ensure that the country recovers from some of the challenges that we're facing economically, given what's going on. And when you think about our strategy of being a paces technology company, we have been flagging that these are the core areas. So Lisa, you've spoken about expanding fiber optic. We have always said there's about 1 million more homes and offices we can reach. We are only at about 200. So we can partner with government to accelerate fiber expansion.  But one thing that is quite clear, even if you accelerate fiber expansion, you need handsets. And we've been talking about handsets as a big enabler. We only have a third penetration of 4G handsets. So we will want to be worked in all the key programs that the government wants to undertake to really develop and make handsets more affordable, more accessible and actually expand the financing of handsets, and we can bring in banks and others to finance handsets. So -- and then on the fintech side, in terms of credit, we've been talking about merchant credit as a very big opportunity. The government is talking about those cohorts of customers that they call hustlers. So boda riders, mama mboga, vegetable seller. All those we think what we have felt is a huge opportunity for accelerating new growth area. So we want to position ourselves as the preferred ICT and fitted partner of choice for government. Of course, we have to partner with everyone else because these will be industry solutions that benefit the country. But we are very excited about them. And if we do this in a very significant way, it will also continue to show government just the importance of our franchise, but also our sector in terms of the country and its goes to the heart of the purpose. So on the downside, we need to make sure that this is done in a way that benefits our business, but also ultimately tenant customers long term.

Thank you very much, Dilip and Peter. So I'll just take the last 2 questions that we have here, and then we'll bring the session to a close, post getting closing remarks from our CEO. So these 2 last questions. I'll address them to you, Dilip. One is from Samuel of Renaissance Capital and Samuel is asking. You've recently launched 5G. What are your plans in terms of 5G pricing on mobile? Do you plan on a differentiated pricing on 5G on mobile devices? And you also mentioned that 5G devices are still expensive. So how are you tackling this challenge. That is from Samuel of Renaissance Capital. And lastly, from [ Lynette Morumbi ] of ABSA Securities. Kindly advise on depreciation and amortization treatment for Ethiopia. Is it safe to assume approximately 25% depreciation charge on network infrastructure and also guide on license treatment. Dilip, over to you.

I think I'll go with the last one first. So the license amortization is straightforward. It is over the license period. On depreciation, we can you take an action, just to check the percentages that we can come from back to us. On Sam's question, a very good question on how do we see our 5G pricing evolving. Our view is the use case that we are now currently and we have launched in the market is the home device, the fixed device on 5G spectrum that customers can use and get a better speed and also higher volume of data allowance. For mobile only, given the penetration of the devices and able to 5G capability is very small. And remember, we are not talking about large-scale launched yet. We are currently available in 35 sites going up to 200 by end of the year. So right now, we are prioritizing the home -- the devices that we'd be using, which is a fixed solution, which is, as you know, that's been the -- probably the most used case, the most discussed and used to use cases across other telcos where they have launched 5G. And that's what we are currently offering to our customers.  And from a device point of view, the device which goes as a CPE, customer premise equipment currently is expensive. You are right. But we don't see this one any differently than what we have seen in the early days of mobile evolution, as you would recall, the cost of device was very high, but that has been going down. And you have seen on 5G devices also some of the markets are really, really aggressive in bringing down the cost of devices. I know some markets like India, I think they're talking about devices, the 5G devices, anything between $75 to $100. So I think over a period of time, this will also go down, and we will see traction coming in. This will go through the similar way, the way we have seen the early days of telecom. But I think the -- we are in this journey, and we will learn from what customers really like about this because this is new in this market. And of course, of course, care as you go along. Peter, anything you want to add on this?

Yes. But probably just to say that we are also open depending on the appetite to especially for home where we do the fixed wireless. We're also open to fund on a pay as you go, so that devices are more accessible, either in packages that are longer dated or the actual devices instead of upfront payment by customers just to drive that penetration.

All right. Thank you so much, Peter. Thank you so much, Dilip. This brings us to the end of the Q&A session. And so without much further ado, allow me to bring back our CEO, Peter Ndegwa, for his closing remarks before we close the session of today. Peter?

Yes. So mine is just to thank you everyone for the engaging call, the great questions. And it's quite clear that Ethiopia is a big area of interest. So therefore, our teams will make sure we'll endeavor to provide as much information for you as a community to understand the Ethiopia business and its impact. The profile, the future, but also the impact on our group results. It is fair to say that we are navigating through a tough economic environment, but the H2 piece looks a lot more clearer than the H1 because at least we are by the election period, which was another uncertainty period. And therefore, we should -- it's not an economic situation re-changed, but at least this is clear. So one of the big elements we are planning over the next 3 to 4 weeks, we will have a lot of the investor engagement in Kenya, online with European investors, but also face-to-face in South Africa, but also the U.S. So we will have enough opportunity over the next 3 to 4 weeks to continue to engage all of you and give you as much information you need to be able to understand our results but also the balance of the year. But thank you to everyone, and thank you to the team for today, and have a great evening and great afternoon.

Thank you, and that brings us to the end of our call today. Thank you so much, Peter. Thank you so much, Dilip. Thank you, everyone. Thanks for the engaging session. And as Peter has mentioned, we shall be engaging some more in the roadshows in the coming weeks. Otherwise, feel free to reach out to us on our Investor Relations Gmail address, and we shall keep engaging on this discussion. Otherwise, good day to all. Thank you.

Thank you.