A 50% reduction in your phone bill is an enormous saving in this era of inflation. How can safaricom compete with that kind of price point?

Point of information: I am IN kenya

The reason we’re discussing what’s heppening is coz we love our country and as such, it’s future and where it’s going is close to our hearts.

ARE WE NOT MEANT to discuss kenya’s issues coz we’re abroad ? That is absolutely ludicrous!! my friend.

And your misguided assertion that we don’t have knowledge on what’s happeneing on the ground ? you GUY, What century do you live in ? Have u no idea of what communication is there for ? i.e. phones and internet ?

We may not be as updated as someone living directly in Kenya but we’re not far off. Why do you always have beef with kenyans residing out of kenya ? did u want to venture abroad but things didn’t work out?

Next thing you’ll end up saying is that coz of kenyatta stealing land, you were not able to succeed. xcuses, xcusess all the time…

DEBT is what a company takes on. The higher the operation profit margins, the higher the ability to take on debt.

Re-payment of DEBT is NOT an expense. It is a balance sheet item. Payment of INTEREST is an expense & shows up in the P&L.

As mzeiya pointed out… safcon & zain had a DUOPOLY. Thus they could charge whatever they wanted. That said… Zain has turned up the heat on safcon. Many users (incl me) have switched over to Zain almost 100%. Forget dual-simming. Zain has helped cut my calling costs by 50% since 2 months ago.

(Its amusing to hear/read about non-residents discussing issues relating to Kenya when they have little knowledge on what’s happening on the ground)

It may be true that they have that amount of debt, however, they may choose to carry it as Long term debt on their balance sheet. That means that it will not be due for a number of years depending on how they and their creditors/ debtors choose to structure it.

Thus, they’ll only be required to expense the current portion of the debt. Example, if their total debt is $300 million as you’ve mentioned, maybe they’ve decided to pay it in 15 years, and as such only $ 20 million of this amount would be actually paid and recognized as an expense every year, thus still having enough room for recognizing profits.

Godfrey, basically what I’m saying is that as much as they owe 300 million, they are not required to repay it the same year, I’m positive that it’s a long term debt they carry.

The mobile phone business is very capital intensive and as such huge amounts of debt on balance sheets are common.

Personally, I think the most important metric is CASH, not Profitability. They way accounting rules are structured, could mean you have lot’s of revenue but are not necessarily doing well. Cash is king

ever heard of the trem “pent up demand”? That could xplain safaricom’s success.

what I find an oddity is your reasoning i.e. the profits generated by safaricom are imposiible since it’s in ” Third World economy with low purchasing power, poor infrastructure and high corruption. ”

As much as there might be some truth to this, this is no reason why profits can’t be made. So long as there’s demand, then the profits would follow.

Also remember that safaricom and Zain were charging premuims for service, they were not cheap even by International standards, basically coz they did not have any competition.

Also, it would not be wise for Michael Joseph to leave, If I were him I wouldn’t. There are other avenues for revenue that have come up since safcom’s inception, especially it’s money transfer biz M-PESA and now it’s ATM, and now they’ll be connected to fiber. There’s alot of room for them to grow.