Together, we can build a brighter future

Overview

Last year was a difficult period for businesses all over the country. According to official reports, Kenya’s economic growth slowed to 4.9 percent, fuelled by political uncertainty as the country dealt with the effects of a prolonged electioneering period.

During this period the credit market also recorded its slowest growth in 14 years, attributed to the interest rate capping and reduced economic activity. In addition, consumers bore the brunt of high food prices occasioned by persistent drought, which negatively affected agricultural production and strained household
budgets.

However, despite the depressed economic performance, Government reports showthat the Information and Communication sector expanded by 11 per cent in 2017, supported mainly by growth in the digitaleconomy, mobile telephony, e-commerce,and online trading, among others. On the competition front, we continue to see a lot of changes expected to generate excitement in market in coming months. We have seen the entrance of new telco and non-telco players into the industry. These developments present evidence of a dynamic market, whose biggest beneficiary is undoubtedly the consumer.

Regulatory environment

Looking at industry regulation, we are following with great interest changes in the regulatory environment, which will continue to be an area of focus for us as we evaluate our position in light of recommendations put forward in a draft industry study commissioned by the Communications Authority. The draft competition study proposes a number of interventions that are of serious concern to us. These include attempts to change the rules of the game by introducing price controls and regulated infrastructure sharing.

While yet to be approved or implemented, the fact that these suggestions have been brought forward is an indication that we could be heading into an era where success – rightfully earned through wellstructured market strategy, innovation and investment – is penalised.

Our position is that the market should be allowed the freedom to regulate itself, and infrastructure-sharing agreements negotiated between operators in commercial terms, as is happening already. Introduction of price controls not only run the risk of players abandoning investment in their own networks as they wait to be hosted, they will also eventually hurt customers and the country’s standing as a leader in innovation.

Additionally, the recommendations that Safaricom be required to roll out services replicable by competitors and limitations in the creation of targeted promotions will not only stifle our ability to innovate for our customers and limit our reach; they also raise questions over their benefit to the over 40 million mobile subscribers in the country – which is what any intervention by the regulator ought to focus on. In light of these developments, we continue to engage the Communications Authority in pursuit of a more considered outcome that will lead to a win-win result. The telecommunications sector in Kenya is liberal and competitive, and operators should be left to compete on quality, price and innovativeness of services. Attempts to introduce retail price controls are retrogressive, anti-consumer and unjustified, and are against the country’s market economy policy.

Business Outlook

While we engage all our stakeholders, we will continue to invest in our business, guided by our brand purpose of Transforming Lives.

We remainsteadfast in delivering on this strategy and growing our shareholders’ wealth

This purpose informs our three-pillar strategy of putting the customer first, providing relevant products and services, and enhancing our operational excellence, which continues to generate favourable results. Looking ahead, we remain steadfast in delivering on this strategy and growing our shareholders’ wealth, while at the same time remaining committed to the Safaricom Way of being a purposeled, customer-obsessed, insights-driven business.

It is a long-term strategy that is already paying off, and one that we believe is integral to the growth of our business.

Corporate governance

board. Mohamed Joosub, Till Streichert and Linda Muriuki were appointed to the board. I welcome the new directors and wish to sincerely thank John Otty and Nancy Macharia for their contribution during their tenure on the board.

I am also pleased to welcome our CEO, Bob Collymore, back to work following hismedical leave of absence. During his time away, he continued to provide valuableleadership to the business and workclosely with our Board of Directors and Executive Committee, which contributed greatly to the strong performance weenjoyed last year. On behalf of the Board, I would like to thank the media, our partners and the general public for respecting Bob’s privacy while he was away.

In closing, I would also like to thank the staff and management of Safaricom for their continued dedication to our purpose of transforming lives. We look forward to another great year of transforming lives and partnering for success, for when we come together, great things happen.

Twaweza!

nicholas ng'ang'a

Chairman