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4-Traders Homepage  >  Equities  >  NAIROBI STOCK EXCHANGE  >  Safaricom Limited    SCOM   KE1000001402

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Alphabet : More firms ride on youth’s love for tech to drive growth

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03/23/2017 | 02:21pm CET

A panel of tech business executives and analysts during the launch of CBA's Loop app . PHOTO | DIANA NGILA | NMG Less than two decades ago, a letter would take weeks-even months- to get to the recipient. Letters were among the fastest means of communication and worked well. Around the same time Postal Corporation of Kenya's money transfer service was the only way of sending money across major towns and to remote regions in Kenya. The parastatal thrived over banks because of its well-developed network across the country. Outside Posta, those willing to take the risk would send the money through well-known bus firms like the Akamba, which were at the time popular because of their relatively cheaper service compared to Posta's. But the bus services were not as reliable as Posta and would on occasion lose parcels. Today sending letters and money is an instant process. The millennials, persons aged between 18 to 34 years, who also witnessed the switch from letters to emails, will most certainly never again get the experience of sending money through the post office or a bus service. They will also probably never know that Posta had a short message service-the telegram- which was billed per word, and which would take the least time (a day) to get to the destination. For them, Telegram is a messaging up to send documents, photos, videos or whatever else they please, in an instant. Millennials' love for technology is evident owing to the rate at which they adapt fast to change. Evidently, their keenness for convenience is one of the greatest contributor towards the fall of paid-for landline phones commerce and Posta's letter and cash transfer business. On the flip side, this lot is inspiring the growth of new industries across the globe as they lean towards services and products that offer instant gratification. Firms with a presence locally, are now riding on the technology wave by coming up with products that resonate with the youth. For instance, in a bid to woo the young people who largely remain unbanked, CBA bank launched a digital product at the beginning of March targeting tech savvy youth to encourage the uptake on online banking services. The product, dubbed Loop, allows them to register an account after downloading the Android app and providing the legal name, ID number and phone number. The PIN number is sent through an SMS and account holders are expected to pick the debit card at a preferred Loop Centre. Features of Loop include sending money, paying bills, buying goods, net worth, goals, and loan and invest. "The digital economy presents many possibilities to businesses. However not many are tapping into these latest developments about the consumer in the multi-screen world and the digital landscape," said Google's regional communications and public affairs manager, Dorothy Ooko. Kenya's largest telco, Safaricom, has also began piloting a payment card that will be linked to customers M-Pesa accounts. The card, called Blaze M-Pesa, and point of sale (POS) terminals will enable customers pay for goods and services faster through the Near Field Communication (NFC) tap-and-go technology. The telco also introduced the use of its customers loyalty credits dubbed Blaze Bonga Points at select retail outlets across the country. Safaricom, through its youth platform Blaze, allows those registered on it to buy items at Java, Domino's Pizza, Coldstone Creamery, Bata, Planet Yoghurt and IMAX as well as selected university cafeterias. Safaricom has been targeting millennials with the entire Blaze suite to grow its market, which has plateaued among the older generation who are less interested in spending on technology and even less in keeping up with it. Global tech firms like Samsung, Tecno, Huawei and Infinix are also aligning their products with the needs of the youth to drive sales in Kenya by providing low and mid-budget smartphones. The electronics are doing brand activation inside colleges in a bid to reach out to target clientele. The low budget phones have also helped increase the penetration of Internet in Kenya according to latest statistics provided by Communications Authority of Kenya, which indicate that there are 37.7 million Internet users. Google's Consumer Barometer indicates that 49 per cent of Kenyans were able to access Internet, a four per cent increase from the figure indicated for 2015. Out of the people able to access Internet in Kenya 57 per cent are aged between 25 to 34 years old. "I would encourage business leaders to leverage Google's Consumer Barometer to learn about the habits of their consumers and grow their businesses," Said Ms Ooko. Data from Kenya's second largest telco, Airtel Kenya, show that more than 1.3million customers making up the millennials consumed 495,726 gigabytes of data last month. This age group, according to the study, uses the Internet to help make purchase decisions with more than 40 per cent using the Internet to make price comparison for smart buys. About 75 per cent of the millennials use smartphone to do product searches online. Millennials are also inspiring technology development. For instance, the front-facing "selfie" cameras on mobile phones were originally inspired by millenials uptake of the social sites. In the recent past social media sites, for instance Facebook, Snapchat and Instagram have also embrace audio and video following millennial-inspired trends. "Africa's young adult population will shape the continent's future. The emerging and frontier markets will develop quickly, and investors who want to take advantage of these opportunities can't ignore millennial influence," said managing partner of Nairobi-based StratLink Africa, Konstantin Makarov in an article published on Entrepreneur.com. Another study by digital research firm Geopoll released last month, says that they have also changed how news is consumed with a majority going online to keep up with the latest happenings. Over 60 per cent of Kenya's millennials get news from social sites, indicating a shift in consumption with the advent of new media. Television was the second most preferred source of news with 27 per cent of millennials in Kenya getting their news from it, followed by newspapers at six per cent. The study also found that millennials spent considerable time playing online games and preferred downloads for entertainment instead of buying DVDs. This aspect has been pushing the on demand TV market which has players including Netflix and Showmax. ANjanja@ke.nationmedia.com

(c) 2017 Nation Media Group. All Rights Reserved. Provided by SyndiGate Media Inc. (Syndigate.info)., source Middle East & North African Newspapers

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Financials ( KES)
Sales 2017 210 000 M
EBIT 2017 68 190 M
Net income 2017 48 024 M
Finance 2017 6 562 M
Yield 2017 5,78%
P/E ratio 2017 15,24
P/E ratio 2018 13,54
EV / Sales 2017 3,46x
EV / Sales 2018 3,09x
Capitalization 733 197 M
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Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 11
Average target price 22,0  KES
Spread / Average Target 20%
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Managers
NameTitle
Robert William Collymore Chief Executive Officer, Executive Director & MD
Nicholas Nganga Chairman
Steve Okeyo Director-Regional Sales & Operations Division
Govinder Sateesh Kamath Chief Financial Officer
Thibaud Rerolle Director-Technical & Information Technology
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