Good morning, good afternoon, good evening from wherever you are joining us from, and welcome to our half year 2023 earnings investor call. We are glad that you are here for this session. My name is Caroline Wambugu. I am the Head of Investor Relations and Financial Planning 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 off our session, allow me to just speak to a few house rules.
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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 off. Peter, over to you.
Yeah. Thank you. Thank you, Caroline. Just confirm that you can hear me just for the benefit of those who are calling in.
We can hear you, Peter. You may proceed.
Yeah. Okay. Good afternoon, good morning, good evening, everyone. Given we have various parties calling from across the world, welcome to the half year results briefing. As Caroline 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 and are 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.
It's fair to say that the results are in the context of a rather challenging macroeconomic environment and an election period that we experience in quarter two of our financial year. 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 pro-productivity agenda.
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 reasonable growth, strong growth in data, but also fixed. The growth of M-PESA moderated, primarily because of the ongoing election period, which we saw in Q2, especially July, August and September. We saw a slight moderation in terms of consumer activity, and given the level of uncertainty. The final thing I wanted to say is we've started to see the impact of Ethiopia. We launched commercial operations recently.
Therefore, we factored in a lot of the initial startup costs, primarily relating to network costs, but also employee costs, and also some of the funding costs that reflect within the Kenya business at the PLC. Dilip will be able to give a little bit more color in terms of how that has affected our results. That's all I wanted to say, but welcome. Beyond, of course, the commercial results that we have announced, we continue to be a purpose-led business.
We've supported community, in particular, as you know, 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 through, drought and famine. 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, our business won't do well. I wanted to leave it there. Ask Dilip to go 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 Pal. You may proceed.
Thank you. My intention is not necessary to go through a lot of detail. We should use this time for question answers. As Peter stated that, we have released our results this morning, and you have seen the numbers. Just to give you a little bit of more color to those. Starting with Kenya Core, I think our headline numbers, as you have noticed, service revenue grew by 4.6% and adjusted with MTR, service revenue grew by 5%. EBITDA grew 3.4%. EBIT grew 0.8%. Adjusted with MTR, 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 of that is also rebooking Kenya books. If we adjust that, the increase in the cost, the net income growth actually normalized basis improves to 3.5%. From a revenue perspective, it's barring voice, messaging, and interconnect, we have seen growth in other lines. We have seen double-digit growth in mobile data, backed by a significant increase in the usage and also improvement in ARPU. We continue to grow our 4G customer base, which has grown now to 12 million, which is a growth of 24% year-over-year. On fixed, we have grown 20%.
We have seen a good improvement in customer intakes and also ARPU improvement resulting in the numbers, the 20% growth that we are seeing. We are at about 462,000 home passed, close to half a million that we are expecting by year end. On as Peter mentioned, M-PESA growth came below our expectation. In the past, M-PESA has been growing over double digit, and this year we have seen a growth of 8.7%. While, I'm sure you'll have a lot of questions around it, but I just want to confirm that we have seen continued growth in values and volumes, which grew by 32%.
We have seen chargeable transactions per customer per month growing 16%, which is now at 22.45. We have seen overall portfolio growth is more towards the newer services that we have launched. While transfers and withdrawal grew by 6.7%, the revenues lying outside transfers and withdrawal actually grew by 13%. We are also excited with the super apps. We have now 6.3 million downloads for the consumer app and about 500,000 for our business app. We see active customers on those apps. You may have seen from our presentation almost 5% of M-PESA revenue came through our consumer super app, which is about KES 3 billion.
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 revenue declined by 3.8%. This is also a function of the macroeconomic factors resulting in inflationary pressure, leading to consumer wallet shrinkage. That's where we see the first impact of the macroeconomic factor. Voice revenue decline was mostly coming from that. 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 still declined, but I just want to highlight that what we have seen in the past of 15%-20% decline, we have now seen a decline, but it's still, you know, higher single digit than the higher double digit that we have seen in the past. Interconnect revenue, of course, is a decline coming from the MTR revenue. MTR impact that we have seen in the first two months of the year. First half, we have seen an impact of about KES 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 even higher than the overall volume growth by 35%, and that's resulting in an increase in M-PESA commission, reflected in the higher direct cost growth. Operating costs. The macroeconomic impact and the Russia-Ukraine war is resulting in a lot of inflationary pressure that we are seeing and 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 in the H1. CapEx, we spent about KES 18 billion, and we did additional borrowing of KES 12 billion to take care of our working capital needs. On Ethiopia, I think Peter mentioned about our launch, which happened on sixth of October.
I think we have shared some numbers. We are quite encouraged with the progress that we see post-launch with 740,000 signups so far up to October. We are all encouraged by the level of activity in those customers. Almost 60% of the active customers are data active, which is very positive. Ethiopia is reporting an EBIT loss of about KES 7 billion, mostly driven by operating costs of KES 6 billion and depreciation of about KES 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 financially in the H1 towards our rollout.
In terms of coverage obligation, we are gearing towards submitting that by Q1 of next year. I think I'm sure we'll talk about that a little later. M-PESA license, that's still to come, but I think we made very good progress. 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 at the EBIT level and the CapEx. CapEx is actually unchanged for both Ethiopia and Kenya, but at an EBIT level for Kenya, there is a downside of about KES 8 billion compensated by upside in Ethiopia.
The rationale for that is, mostly coming from the signposting that we have done during our annual results, that our guidance was based on, the existing current macroeconomic factors and also the regulatory environment. We have seen the impact coming through on MTR, and we also have seen the impact in the top line coming from macroeconomic impact that we have seen. Let me then pause here and back to you, Caroline, for the Q&A. Thank you.
Thank you. Thank you very much, Peter. Thank you very much, Dilip. Once again, just to remind us, if you have any questions, for our leaders, just kindly chat. Just put them on the Q&A tab and we'll be able to read this out to you, on your behalf rather, so that our leadership can respond to that. Having said that, I do see a number of questions, and the first one is from John Davies. John Davies 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 a question by Rohit Modi of Citi, and then this I'll hand over to you, Dilip. "Please could you give more color on lower EBIT 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. Back to you, Dilip.
Thank you. Thank you, John and Rohit. On service revenue breakdown, normally we don't provide a quarterly breakdown of our numbers. 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 then we got into Q2. There are several factors. I think macroeconomic being one. I think there is other factor, which is election. Peter mentioned about election impacting activities, business activities, which you have seen M-PESA coming down significantly during that period. I think the way to look at is, yes, the second quarter service revenue growth was lower than quarter one.
On lower EBIT explanation, three things actually, without necessarily giving you an exact split of where this KES 8 billion is 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 KES 2 billion. We have, as you have seen the revenue profile, seen significant pressure on customer wallet impacting our top line. 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 cost.
Almost 50% of the increase in the operating cost line items are coming from energy costs. 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. Of course, there are other small elements which are also impacting as the small businessmen are facing challenges, and we need to ensure that, you know, 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 three impacts. One is on the MTR.
Second is on the top line coming lower than expectation based on the macroeconomic factors that we have seen now, having seen the H1 development. Then the third element is on the cost side, but mostly in energy, and the currency side.
Thank you, Dilip Pal. Four questions following on here from Tracy Kivunyu of SBG Securities. 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: With outgoing 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 the did other OpEx and expected credit losses accelerate in this first half . Let me just repeat that. Why did other OpEx and expected 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've missed anything. I, as always, Tracy comes with many questions. Let me start with Tracy, thank you for your questions. First on M-PESA. What I wanted to highlight here is underlying health of M-PESA business is very strong. Where do I get that 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 10%, which means that the ecosystem is growing, which is what makes us exciting, that we can leverage, we can monetize from the ecosystem.
Second thing, one key factors driving the volumes and values is the number of transactions, as I mentioned in my opening remarks. 22.45 transactions per customer per month is 16% growth over last year. When we are discussing about last year, the same questions came in that do you see still opportunity to grow in your transactions per customer per month? We said that pre-COVID we were about 10. We took almost like 13 years to reach where we have built on M-PESA, in 15 years of M-PESA history, but it took just 2 years to more than double. We see that growing faster.
What you need to keep it in mind is the newer services that we are launching, the monetization of that in terms of the revenue could be below it than the traditional one, right? As you see the proportion of new business transactions, they are higher than the traditional business. That means the volumes and values will grow, but the revenue will come slower. 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 the revenue. I'm less concerned about the underlying health of the M-PESA business.
I think in every parameter, so whether it is growing customer, you've seen a growth in customers, you have seen a growth in ARPU. Growing customers is something always consistent. Do you see an opportunity? That question I think we have addressed by executing better in every single year. We are growing our customers. To your questions that are related to M-PESA 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 big data to monetize more and to create more customer engagements so that 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 while they're in app. As I mentioned in my opening remarks, it's 39-40 transactions compared to an average of 22. Which means that there is more engagement that's happening. With the enablement of big data at CBN and with the mini apps coming through, I think we are very excited about that this will enable us to grow the revenue. I mentioned about 5% of M-PESA revenue coming to app. It's 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 active customers, and more importantly, the level of engagements we see much better than the consumer app. I think the strategy is to continue doing what we are doing, what we are good at, understanding data analytics to drive engagements with the customers. I think overall, since we're still on M-PESA, we have quite a lot of new areas that we were in pipeline in terms of approvals. At this point in time, I think we do have quite a few of those would be coming through M-PESA Junior, or M-PESA Go, as we're calling it, for 10- to 18-year-old customers, actually for students. We have wealth management. We spoke about that in the past.
We have the required approval for us to now launch it, and you should be hearing from us soon, about this launch. We have also launched recently some of the other products that we spoke about, whether it is the M-PESA GlobalPay, the tie-up with Visa. Going beyond the traditional financial services, providing expanding the scope of business what has been our main strategy condition, we are going towards that. You'll see us talking about more about savings, wealth management, insurance. Insurance is still at a nascent stage, although we don't have the required approval to go through to launch it, but that will also be coming too in future. From a voice perspective, your question around deceleration in voice.
Yes, deceleration in voice, we are not surprised given the economic hardship that our customers are going through in terms of wallet shrinkage. That we have seen through our many analysis that we have done when we segment our customers. 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 big data analytics to know exactly the vulnerable section of those customers who needs certain support at this point in time, what kind of offers will enable them to stick to us, and also which enables them to use more going forward.
I think you are significantly enabling our big data and CBM capabilities to ensure that the voice deceleration is lower than what we have seen in H1. Let's just accept that voice has been on a path and what has been challenging in terms of the growth that we haven't seen I think has been flat to a single-digit growth based on the trend that we have seen elsewhere. This is something that we need to live with, but of course combined with the economic challenges that we see for the deceleration. On expected credit loss, I don't know if anything specific for other OpEx.
Maybe, my colleague can take that as an action item. 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. We understand the difficulties, but it's not that those customers are not using our services. Because they didn't pay within the time, based on our policy, we needed to provide that. Also on our credit product, especially on the airtime, the product that we call Okoa Jahazi, we have seen a bit of acceleration in the losses that we have in the first half of the year. This is also probably a function of the economic difficulties that we have seen. Majorly, we see this is more of a timing gap rather than a continuation of loss going forward. Let me pause here, and Caroline, back to you.
Yes. Thanks, Dilip. Thanks, Tracy for those questions. I'll take another set of questions. One here from Rohit Modi. Rohit 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 if it happens? Will that have an impact on OpEx and CapEx levels in future? And I'll combine that with a question from Madhvendra 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? That is on the mobile money business split. 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 deliberate 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.
Thank you. That's a great question. In terms of split, I know there has been quite a bit of coverage on Safaricom and the split between GSM and mobile money business. Our view is that we should keep the two businesses together, and that's what we've been guiding analysts, investors all along, and that has not changed. What we are going 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. Therefore, the listed business is the same.
I think there's no question potentially that may give a little bit much better visibility to investors, much better understanding, and greater focus. I should say that internally, those businesses all operate separately. The M-PESA business operate as separate teams. It is actually internal reorganization that we need to do to ensure that we can fit it within a group structure, but continue to collaborate in the same way that we collaborate today, but within more formalized structures. That in future, if there was an intention to, say, raise money, kind of, co-invest with others, then it is easier to deal with that. 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 parliamentarians said it will make it easier for the regulators to regulate Safaricom if the businesses were split. Today, the Central Bank regulates Safaricom's mobile money business. The Communications Authority regulates the GSM business. 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. That doesn't prevent us from continuing to be regulated by different regulators.
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 treats internal reorganization as if there was external, I mean, disposals and so on and so forth. We do need approvals if we are going that direction, so that we don't have to pay VAT or withholding tax or whatever, in order for us to be able to reorganize the way we intend to. The board has not approved. They've given us directional support for that process. Eventually we would need all the support from the government, in terms of tax reliefs and so on, to be able to go that direction.
Let me take the EBIT guidance on Ethiopia. The reason for upside in Ethiopia EBIT is mainly coming from two reasons. One is a bit of slower pace on the rollout that we originally anticipated, the number of sites that we are planning to roll out. That's coming slightly lower. Also within that, the mix of our own sites versus the sites that we were planning to take Ethio telecom, that also came slightly more in favor of our own sites build. It's more of, I would say, timing issue, and also there are some, you know, costs that we originally planned didn't come through. I won't consider that material, but it's mostly the cost that we. That came through as lower because of the rollout models mix as well as the number of sites. Back to you, Caroline.
Okay. Thank you, Peter. Thank you, Dilip. Next questions are here from Silha. Silha Rasugu from EFG Hermes. Silha thanks us for the call, and thank you also for your questions, Silha, 'cause I see you've gone ahead and jotted down six questions, which I'll read now. I'll read the first three, and then we'll tackle the next three. The first question, and this goes to Dilip. In these 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 timelines for the mobile financial services license in Ethiopia? Question number three, which it says is 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 timelines for the MFS license in Ethiopia. Any indicative timelines?
All right.
Okay.
Let me start with that first. On timelines for M-PESA, what we're saying is there are steps towards getting a license in place, and within those 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 a foreign investor to come and invest as a foreign investor in the mobile financial services space. That's the work from the committee was done, now this needs to be approved in the parliament, and that's what is waiting. As you have already seen from the public announcement, we are expecting a license soon based on the parliamentary approval process.
I think the other part is also how we are allowing ourselves 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 build those creation of the product and services and platform and technology side that we are currently driving. It's not necessarily a date that we can provide, but we believe the hurdles that were required to be concluded. I think we made very good progress on that. We are just at the last leg of that approval.
On your questions 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 vitiate 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 allowable expenses that we 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 losses from JV questions, yes, we do report numbers from one JV and two associate companies. JV, which is MPA, the M-PESA Africa, and two associate companies. One is Circle Gas and other is a company called TEAMS. What you're seeing is, compared to last year, the losses from those entities are going down, and including M-PESA Africa. That's what is reflected in the numbers that we have reported. From a role of M-PESA Africa in Ethiopia, that role is no different than the role that they play in Kenya. As all of you are aware of, M-PESA Africa's mandate is to develop products and platforms which can be rolled out across all markets.
As part of Ethiopia's capability that we are building, as I said, 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 those products and services actually, supported by M-PESA Africa. So that's how they operate. And they, the M-PESA Africa will come in and make sure that that one product which is launched in one market and can be replicated across all other markets that we operate at M-PESA. Yeah, so first three I think I have answered. Now, Caroline, last, the second lot.
Yes, the second lot reads as follows. Question number 4, 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? I hope you captured that, Dilip.
Yeah, I have captured that. Again, let me start with jump in receivables question. I think if you're referring to last year's versus this year, we had actually this is coming from a prepayment. Last year we paid for our CA dues post-September, and the amount is about KES 7 billion. This year we paid within September. That's basically a timing issue. It's not necessarily. Other than that, I think we have seen some increase coming through on our Lipa na M-PESA device receivables. 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 our ecosystem, and part of this is also driven by Lipa na M-PESA. That distribution is also reflected. On your questions on expected credit loss, yes, we did book expected credit loss on account of Telkom Kenya as well as there was delay in recovery of current dues. The total amount receivables from Kenya is actually a substantial. Telkom Kenya owes us over KES 3 billion, and there is a large amount of that is past dues that we are dealing with separately. 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. As you are aware, they are also suffering a lot in terms of their cash, their ability to pay us. This is something on our radar, and we are watching it very closely. In terms of proportion, I think the numbers that we 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. 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 Griffiths of Vergent. We'll take three sets of questions. Question number 1 from Sam: Why was revenue growth of M-PESA so much slower than value and volume growth? Is there a product mix impact, and if so, which products? The second question once again from Sam: Can you provide the growth number for the M-PESA float year-on-year? Thirdly, from Madhvendra 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. Those questions to you, Dilip.
Okay. I think on the first one, the revenue growth slower compared to the volume growth. First of all, I think the first data point is that our quarter two revenue came much slower than the quarter one in M-PESA. Yeah. Revenue growth in quarter two was slower than in quarter one. I think for M-PESA it was even worse. 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.
That's why you see a slowdown because in the past, you know, I think in a normal situation, we've never seen a single digit growth in M-PESA. During that period when business activities came down, we have seen a slower growth in M-PESA. Let's also accept that M-PESA is not M-PESA actually reflects what consumers are spending in the market. The macroeconomic factors, while the consumers are prioritizing, you know, and they're you see that happening when they're going to a supermarket. The same amount of money they're spending, they're getting a lower basket. There is an optimization happening from the consumer side as well. I cannot quantify that, but that impact is also factored in here.
To your question on why the growth in volume values is not reflected in the revenue growth, I think the answer will be in two parts. One is, remember I spoke about the deposit growth, which is still 35% year-over-year. The deposits and, you know, if you go back to the pre-COVID period and where we are now, I think the deposits alone has probably grown by threefold. Remember the deposits that come to our wallet, there is no monetization. The monetization comes later on. There is one chunk of that monetization is missing today, which is wallet to bank and bank to wallet. Sorry, the wallet to bank leg, which we earn our revenue from.
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 they would still protect margin because cost of delivering those are lower. It's a scale that we need to operate, and that's why when we say we're excited about the volume, because we know that that allows us to gain that scale. It's not necessarily mixed issue.
Mixed issue in a sense that that's the business that we are pushing, wherein this newer areas of growth, the transactions are actually growing faster than the traditional business, which is transfers and withdrawals. That, I think we have even showed one chart wherein you see that the gap between that is now growing. Of course, which means that the newer business will contribute more to our growth going forward than before. Now, the other two questions, I would float Caroline and the team, if you can take that as a. I don't exactly remember the numbers. I don't want to quote a wrong number on this. GDP contribution on M-PESA.
The numbers that probably we have spoken about is around 50-60% of GDP that goes through M-PESA ecosystem. I'm not sure about 200%. Maybe this, maybe there is a way that you're calculating, but I'm happy to engage with you. Caroline, you can take that also as an action item so that there is a way that was calculated differently than the way we calculate. Back to you.
Thank you very much, Dilip. Yes, we'll reach out to you, Sam, and Madhvendra Singh on those two areas so that we can engage further. Allow me to just quickly revisit a question I think we did not completely address from Silha Rasugu. This is to you, Peter. How does Safaricom think around competitive dynamics in Kenya now that Telkom Kenya's ownership has reverted back to the government? Peter.
Okay. Yeah, good question. I think we're asking ourselves that question ourselves. In our view, on a more serious note, in our view, nothing has changed because the assets that Telkom Kenya owns haven't changed. They still have a mobile business. They have a strong fixed business and an enterprise business that primarily serves the public sector. They are assets that we've always been interested in, but given the size of Safaricom, we know that it is, you know, during the whole merger between Airtel Kenya and Telkom Kenya, there are some assets which we know would be attractive. If Telkom Kenya was selling assets, we'd be interested.
Given that they are a going concern, we need to wait and see how government wants to think about Telkom Kenya's future and how they want to run it into the future. 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 Telkom Kenya will change, because we do not believe that the government intends to run a telco, a commercial telecommunications organization. Should that change, then we will see what the effect of that in terms of whoever comes, whoever is the future owner of Telkom Kenya. At this stage, we see them as status quo. We interconnect with them. We work in the same way we were working before, and we are waiting to see the direction that the government takes.
Thank you so much, Peter, for that. I'll read the next set of questions. These are from Linet. Linet of Absa Securities. First question, and this question will be to you, Dilip. I'll read the first two and then the next two in the next cycle. Guided by the full year CapEx estimate, Safaricom's first year 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 options? And what is the targeted currency split? Dilip?
I didn't necessarily get the question on currency split. Linet, if you can write it down once again so that I understand it better. The question on the CapEx, very good question, Linet. You're right. I think the first half, first six months of the current financial year, we are about 40% of the full year CapEx guidance. I think on Kenya's side, we. You know, it's normally if you go back historically, you'll see, typically, you know, some of the delays that happen, it gets ramped up in the second half. I have not.
This is not necessarily a very different profile than what you've seen from the Kenya side. You know, in terms of the numbers that we are projecting about KES 40-43 billion, we have spent about KES 18 billion. That's not necessarily a very bad outcome. On Ethiopia side, probably that's where you might see the spend on the first half is about KES 19.5 billion, but then there's a lot that needs to come in in the second half of the year. This is actually driven by the pace at which we are now rolling out.
Remember, you know, we had quite a few headwinds that we were dealing with in the first half of the year, in terms of just the getting all our vendors, the suppliers, the middle vendors, to a speed, a run rate speed that they need to get into, which took time. The ramp up took time and, you know, some of the vendors did not necessarily get into that level as expected. That took a while. Second thing is on the speed at which Ethio telecom sites that were coming was also not coming forth. You recall that we.
It took a while for us to conclude the agreement, and therefore there is a timeline by which those sites come to us, knowing very well that there are upgrade tools required in those sites. That's what I said. It's also linked with, I think, the one question that came in, that our cost came later, slower than what we originally expected. Our expectation now, given that we do have coverage obligation to complete by first quarter of next year, we really need to get our rollout 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 factored in for Ethiopia. I think that's probably making that ratio a bit worse.
I think that's how we are thinking. It is fair to say that probably I mean, we'll see how things land up, but it's unlikely that we'll be on the higher end of the guidance. That's just for your information. On funding Ethiopia, majority of the funding has gone through equity, and then followed by vendor financing. There's now, you know, you'll start seeing that in the liabilities. That's also building up in the Ethiopia balance sheet. Third element is local currency funding, and that's also beginning to show up. Just in terms of local currency funding, in Kenyan shilling terms, we do have end of September about KES 6 billion Kenyan shilling equivalent in local-based funding that we have used.
Combination of all these three is what has helped us in funding our Ethiopia operations. I think going forward, as we mentioned before, you'll see probably more external debt coming through and the public announcement and other conversations that you have had around IFC is geared towards that. 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. The focus is more on debt, more on debt and external debt coming for Ethiopia operations. I think I will wait for your understanding of the other questions on the split of currency, right? Other than that, Caroline, yeah, I answered the other two questions.
Yes, you did. Thanks, Dilip. The next two questions are once again from Lynette. The third question here is Safaricom Ethiopia offered discounted rates in the first half of this year. I think she's making reference to the welcome offer. 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 $1.5-$2 billion spend in Ethiopia remains unchanged. However, Ethiopia's full year 2022, and this first half CapEx has fallen short of the targeted spend. Should we assume that the annual CapEx over the next years, that is FY 2024 to FY 2026, will be higher than the currently estimated CapEx number of KES 60 billion? Dilip, over to you.
Thank you, Lynette. On the discounted offer, as you know, these are always promotional offers. Promotional offer is always for a limited period when you sign up a customer, and as part of our special launch offer, we have given certain minutes, certain megabits and certain SMS. These basically lapse after, so they need to use it within one month. To your questions around, there is a 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.
It goes hand in hand and of course, you know, given a launch and special promotion that we need to do. We continue doing that. 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 KES 60 billion CapEx that I think you're talking about and referencing FY 2023, I think we did mention about this before. That's why we give a broad number or so. Any catch-up slower in one year will be definitely made up in subsequent years.
We don't expect that $1.5 billion-$2 billion numbers to change, but within that could change, you know, year-over-year could change. Of course, for FY 2024 when we guide, we'll also talk about, you know, what does it mean in FY 2024, but that's for a later date, not today.
Okay. Thank you very much.
Caroline, 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 second player in the market, customers are starting to learn to have dual SIMs, to have an alternative provider. 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 calls, rather than just purely within the same network, which we'll need to educate customers because the charges will be different, depending on what the interconnect is.
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 is less of an issue because we have 4G everywhere. The penetration of data is pretty strong. And we knew that there's a lot of latent demand that was not being fulfilled because of the quality of network and also some of the propositions that were 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 when we announced results today, there was a journalist who asked us, or rather, I think it was a journalist from Ethiopia who felt that customers were expecting that we would discount quite significantly against the Ethio telecom's pricing. We clarified that the intention is actually generally to be closer to what the main operator is offering, especially on voice. I think the key is we will learn as we go, and by the end of the year, I think we'll have enough learnings to give a lot more texture to investors on how the customers are receiving both 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 three times, do you feel the need to pursue the regulator for reversal in the earlier guidelines that removed bank to M-PESA fees? Peter?
Yeah. The bank-to-wallet and the wallet-to-bank free transactions was never expected to be permanent. That has always been the understanding with the regulator. We dealt with the bigger matter, which was the P2P, which we went back to charging at a much lower cost. We expect that in time we will have wallet to bank and bank to wallet being charged. We believe that it will be at a much lower cost, and we're already having conversations with the industry and the central bank to see how that evolves. Clearly, you can't have a franchise that's free because that is important that we continue to maintain that 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 to bank. It is important that in the end you still have a future-proofed charging system that allows us to make sure that that ecosystem the economics of the ecosystem are right. We do expect at some point we will go back to charging because it was not expected to be free permanently.
Thank you, Peter. Dilip, I have three questions for you that were posted on the chat. 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? Then another question from, I think that's Danesh here. Is the decline in voice revenue more linked to cannibalization from data versus elections? Lastly, the question from Samuel Njihia of Renaissance Capital. He asks, Safaricom recently lowered rates on Fuliza. How are transaction values, volumes trending, and do you expect growth in transaction values to overcome the lower take rates on Fuliza? Dilip, over to you.
All right. Solomon, I think your question around what the jump in borrowings. These are short-term borrowings, and I can confirm to you these are short-term borrowings and also in local currency. There is no hard currency borrowing that we have taken in this time, in this first half of the year. Danesh, to your question on cannibalization and whether it is linked with that more than the other things. No. Cannibalization, Danesh, is not new. I think that's been going on. I think in our previous engagements, we've always highlighted that as per global trend, voice will be under pressure. We are trying to still defend our share to make sure that, you know, an important segment is like voice. The pace of decline is lower.
We said that the voice is expected to decline. What we have seen in the first half of the year is the rate of deceleration is much higher. Our assessment and, based on our analysis, what we have seen, actual customer behavior, it's more coming from the macroeconomic factors, rather than anything else and also, you know, the disruption or slowdown in activities that we have seen during election period. 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 we brought back the P2P charging. You would recall this conversation around that time when we were releasing our H1 results. There was 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 the volumes, transactions are always higher. I really cannot comment on just, you know, this is just about one month now for me to give you any color to what you see.
Our expectation is that, actually, the way if you have seen the optimization in the price, many customers if they're repaying within three days, they're just paying the upfront fee and not paying anything per day charges. Because first three days are free up to a certain value of the transaction. Our expectation that it always allows customers expansion of more users, more Fuliza customers coming through and therefore increasing the volumes and values. We have to wait and see, you know, how the second half of the year when you see the impact coming through, that pans out, and we'll of course brief you when we release our full year results. I don't know whether Peter, you want to add any more color to the Fuliza conversation?
Yeah. I think probably beyond answering the question, one of the key element 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. We believe that we've now gotten to a good place where two things we achieved, and that's one of the things that were 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 seven or 14 days. We realized the duration in which most people were having Fuliza was between 10 and 15 days, which is too long for an emergency credit.
Therefore, that's why we said, "Let's put the front end," especially for small amounts below $10. The front end as free for the first three days so that people use it properly for as emergency credit. Therefore, it's more sustainable for that use case. If customers want term loans, we will, as part of merchant credit in future, be able to provide propositions that meet the needs of customers who want term loans that are beyond seven days. 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. We believe, as Dilip has said, the need is there. We 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 three 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 five years. Francis, maybe just to let you know, this information is part of what was shared this morning through the earnings release. You'll find the CapEx guidance for Ethiopia for the next five years in the presentation. It's $1.5 billion-$2 billion in the next five years, and we don't give a guidance on OpEx. Allow us to just close at that on that one. There's a question from Lucy Odhiambo.
Lucy is asking, kindly provide 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 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 Steere. Please, may you provide guidance on the capital intensity of the core telco business versus M-PESA? Dilip, if you could kindly take those two questions.
Okay. Caroline, I think you answered the first question when you said that we don't give guidance on OpEx. That way I think the way to look at is if you look at FY 2023 guidance. Ethiopia we are, we have revised our EBIT guidance from a previous loss of KES 30-33 billion to now KES 22-25 billion. That actually represents all the costs that we are incurring in Ethiopia, including network operating costs. One has to, I mean, you have to actually assume that network operating costs will be an important cost element in Ethiopia given that the rollouts are happening and other costs are just picking up.
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, yeah, I hear you. I take this as an input that in future whether there is an opportunity for us to now give 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'm sure you have the same. But we just don't calculate it that way. We don't guide that way to the market, so we haven't done that. But I take that as an input. Let's see whether we can provide it in future.
Thank you. Thank you, Dilip. The next set of questions, I have a question here from Ali. Ali is with the FIM Partners. 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 had 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 the split does not create a cash flow or a valuation drag, particularly on M-PESA in the case there is a split.
I think this is a CFO type question. 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, a tower 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 be housed within Safaricom and the synergy benefits will continue to accrue 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 as external hive-offs or anything like that. That's also one of the reasons why we are saying there are some tax considerations to be overcome. That is an internal reorganization rather than a kind of permanent hive-offs of businesses. If there's any issue with respect to how it affects shareholder value, we would only make the decisions in the best interest of both shareholders, but also how customers and regulatory constraints allow us to do. Dilip, if you have any other comments on that, please do.
No. Thank you, Peter. I think you covered it well. 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. Thank you very much, Peter and Dilip. Thanks for that, response. The next set of questions, one from Farouk. Farouk is with 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. Taken together with this other question from Sam. Sam Griffiths asks, have you opened up the M-PESA up to third-party developers yet? If not, when do you expect to? Dilip.
Okay. Good questions, Farouk. Our view is that the inflation and therefore a consumer pressure impact pretty much all segments. I can't say that one is protected. Within, if you have to do a kind of a waterfall which gets impacted first, and then what others, I would say voice probably is the one which 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 a in terms of inflation, the ability to withstand 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 when you have less money to spend, and that's where our whole ecosystem touches, you know, where the money is flowing, money is moving across the ecosystem. If there is less money to spend, it does impact mobile money as well. I have to say that all business segments, what you've spoken about, voice, data, mobile money, does impact. In terms of most impact, I think probably starting with the voice. On salaries, I don't know what exactly the question was. Yes, we do pay salaries to our employees.
We do have an annual review that we provide, that we go through a proper benchmarking process. The entire organization is going into Agile, and therefore, there are ways that we assess our employees based on their crafts and based on their contribution, and based on that, an appropriate compensation is given. 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 you do annual reviews of employees' compensation. On the pricing strategy, unfortunately, probably that's where the telcos are more constrained in terms of inflation pressure. You see that other industries are able to increase their price.
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 consumer's wallet. You probably hear that a bit in European markets. Some actually European operators have increased their prices, but that's not necessarily has happened here, and that's. I don't see that happening just because inflation has gone up and the pricing gone up. 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 Sam's question on third party. We do have about 50,000, over 50,000, developers. You know, they build solutions in our platform. To your question on whether the super app will be added to that, I think the way the super app is coming in, the mini apps are coming. Mini apps are the apps of. For example, the 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 that context rather than developing it here.
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. Right now, it's not there. They come in, 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.
Did Caroline, can I just add a couple of points there?
Yes.
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 research agencies to interview customers and say, "How are they reprioritizing their spend depending on the categories that they actually buy?" We've been doing that for a while. That's the way, first of all, we keep in touch in terms of communication because communication is still very important for customers. If you think about one of the dimensions we think about, which is the most mature product that a customer can do without, and voice is one, which is what Dilip has said.
On data, there's still a lot of headroom to grow the amount of data that people use. In fact, one of the constraints is the type of handset they have. As long as you have the right handset, you can always use more. We've seen close to 70% increase in usage of data. That also has allowed us to reduce price by about 30%. The economics of data still have a lot of headroom as long as consumers continue to use more. We have corrected. Remember that our business, given it's been premium priced, we've corrected versus competition quite significantly, especially on the data side. We are closer to where the rest of the competitors are. On voice, we still have a premium.
Therefore, if when you think about trade-offs between us and competition, voice will tend to be more affected than data where we are closer to where the rest of the market, the market is. I think those are important consideration. On the M-PESA side, it is more the traditional services like withdrawals and P2P. That's why increasing the way the franchise is used, so the wallet to bank, increasing and so on is very important. Actually growing the use cases that customers are using on the M-PESA allows them to trade off against various components. They are seeing it as one holistic offering rather than specific services that they are receiving from our business.
On cost of employees, which is the other comment I wanted to make. Given that we are a technology and fintech business, 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 increase salaries for those types of skills. 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. That clearly has an inflationary impact. Generally, overall employee base, we do a benchmark and ensure our employees are hitting the benchmarks that we want.
Thank you very much, Peter and, Dilip, for those, responses. Let me take another set of three. Just to let us know, I can see we are two minutes to the appointed time in terms of what we had allocated for this session. We shall request that you indulge us. Maybe we can go another maximum ten 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. A question here. Actually two questions, from Ali. Can you remind us if the Ethiopian MFS license is embedded in the license you already paid for, or will that require another payment?
The other question from Ali is, finally: How will rising interest rates change your payback period expectations for Ethiopia, if at all? Lastly here, another question from Sammy, and these three questions I'm assigning to you, Dilip. Kindly comment on the share price and dividend policy. That is from Sammy Kibet.
All right. Ali, the first question on whether MFS license was embedded in the license that was awarded to us for Ethiopia, the answer is no. The bid was for a GSM license, and it was very clear that there will be separate process for MFS license. That's what I think we were discussing, and we are also giving you update. The process or issue of that license has progressed very well, but there are one or two stress tests 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's what we are not concluded. It was not embedded as part of the original GSM license that were issued.
Interest rate, we do simulations on interest rate and the impact on payback period. At this point in time, there is nothing that we need to alert you that it is changing. It is still within the range that we are expecting. This is one area we need to watch out very carefully how this plans out over a long period of time. Is this something gonna be sustaining for a long term, or is this going to cool down, or in some time to come? Share price dividend. We mentioned before there's 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 a full year's net income, that will happen. That of course is a board matter and will be discussed and agreed, and we'll of course inform you appropriately. 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 will be part of the consideration for the dividend payout. On share price, if your question is on the share price, I don't know. If the question is around, Caroline, is the share price decline or what is that I am supposed to comment on share price?
It's not very specific, Dilip. 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. At least the dividend policy piece, I'm sure you've benefited from the response. Dilip, now that I still have you, let me give you the next three questions. I have three 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 Telecommunications 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 allow you to take those two, and then this 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 calls, local manufacturing of phones, etc., etc. How does Safaricom intend 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.
Thank you, Lisa. On source of revenue in Ethiopia, in case you have seen our presentation, we have reported a revenue of KES 98.3 million total revenue as on September. KES 98.3 million, out of which KES 9.1 million, what you call that a service revenue. The difference between the total revenue and service revenue is mostly the device revenue and such that is still that we book as a revenue. That's why in this total revenue. Service revenue is voice and data. I think in the presentation you will see that our almost you know 50%-60% of our customers who are using voice are also signing for data, so that's very positive. It's a mix of.
We don't have the split yet, but in future, of course, we'll split it into this between voice and data for Ethiopia. Now to your second question on handset cost. Yeah, that cost is mainly on account of the handsets that we're selling. I think we have reported that number as well, you know, the number of handsets that we have sold. 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 70,000 handsets. So the numbers are smaller.
I think half of that would have come in by September. What you have seen in the handset cost that we have booked. I can confirm to you that we are not subsidizing on the devices. There is a latent demand for devices in the market, and that we are fulfilling and we are not subsidizing them. Peter, if you can take the third one.
Yeah. The question from Lisa is a critical one, the one on the new government. We see it in a very positive way, because we see a lot of the areas. The new government has made ICT and fintech as central to how they want to achieve their social and economic agenda from a manifesto perspective. also start to ensure that the country recovers from some of the challenges that it's facing economically, given what's going on. When you think about our strategy of being a purpose-led technology company, we have been flagging that this, these are the core areas. Lisa, you've spoken about expanding fiber optic. We have already said there's about 1 million more homes and offices we can reach.
We are only at around 200. We can partner with government to accelerate fiber expansion. 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. We will want to be involved in all the key programs that the government wants to undertake to really revamp 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. 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. You know, boda boda rider, you know, mama mboga, you know, the vegetable seller. All those are within what we have felt is a huge opportunity for accelerating new growth area. We want to position ourselves as the preferred ICT and fintech partner of choice for government. Of course, we have to partner with everyone else because these will be industry solutions that benefit the country. We're very excited about them. If we do this in a very significant way, it'll also continue to show government just the importance of our franchise, but also our sector in terms of the country and this goes to the heart of purpose. On the downside, we need to make sure that these things are done in a way that benefit our business but also ultimately benefits customers long term.
Thank you. Thank you very much, Dilip Pal and Peter Ndegwa. I'll just take the last two questions that we have here, and then we'll bring the session to a close post getting closing remarks from our CEO. These two last questions, I'll address them to you, Dilip Pal. One is from Samuel Njihia of Renaissance Capital, and Samuel Njihia 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 Njihia of Renaissance Capital. Lastly, from Linette Murungi of Absa Securities: Kindly advise on depreciation and amortization treatment for Ethiopia. Is it safe to assume approximately 25% depreciation charge on network infrastructure?
Also guidance on license treatment. Dilip, over to you. Thank you. I think I'll go the last one first. The license amortization is straightforward. It is over the license period. On depreciation, Caroline, can you take an action just to check the percentages that we can confirm back to her. On Samuel's question, a very good question on, you know, how do we see our 5G pricing evolving. Our view is that 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, the.
Given the penetration of the devices enabled with 5G capability is very small. Remember we are not talking about a large scale launch yet. We are currently available in 35 sites going up to 200 by end of the year. Right now we are prioritizing the home devices that we'd be using, which is the fixed solution. Which is, as you know, that's been probably the most used case. The most discussed and used use cases across other telcos where they have launched 5G, and that's what we are currently offering to our customers. From a device point of view, the device which goes as a CPE, a customer premises equipment currently is expensive. You are right.
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 device cost of device was very high, but that has been going down. You have seen on 5G devices also some of the markets are 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-$100. 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 that we have seen the early days of telecom.
I think 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 we'll course correct as we go along. Peter, anything you want to add on this?
Probably just to say that we are also open, depending on the appetite, to especially for home, where we do the fixed wireless. We are 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 the penetration.
All right. Thank you so much, Peter. Thank you so much, Dilip. This brings us to the end of the Q&A session. Without much further ado, allow me to bring back our CEO, Peter Ndegwa, for his closing remarks before we close the session officially. Peter.
Mine is just to thank everyone for the engaging call, the great questions, and it's quite clear that Ethiopia is a big area of interest. Therefore, our teams will endeavor to provide as much information for you as a community to understand the Ethiopia business and its impact, its 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. The H2 piece looks a lot more clearer than the H1, because at least we are over the election period, which was another uncertainty period.
Therefore we should, it's not that the economic situation will change, but at least it is clearer. One of the big elements we are planning over the next three to four weeks, we will have a lot of investor engagement in Kenya, online with our European investors. Also face-to-face in South Africa, but also the US. We will have enough opportunity over the next three to four 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. Thank you to everyone, and thank you to the team for today. Have a great evening and great afternoon.
Thank you. 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. As Peter has mentioned, we shall be engaging some more in the roadshows in the coming weeks. Otherwise, also feel free to reach out to us on our investor relations email address, and we shall keep engaging on this discussion. Otherwise, good day to all. Thank you.
Thank you.
Thank you.