"We are relieved to have recovered from the damaging price wars. We are now focusing on customer growth" - Bob Collymore, Safaricom CEO.

The company's shareholders are in for a shock as Safaricom shares may not yield the dividends many are hoping it will. The 94% increase in net income was just the kind of push the telecommunication company needed to get back on track. Its performance did however, restore investor confidence in the stock and create a chance for a quick sale for some.

A simple horizontal analysis of the main features of the 2011 half-year results and this year's will show you what Safaricom’s results really mean.

*Figures in the table are in KES Billions, except for the earnings per share.

Total Revenue

This covers all of the company’s recorded revenues and includes sources such as voice, messaging, fixed data, mobile data, M-Pesa and other service revenues. Looking at the unaudited revenues for the last three years, an increase is noted at 5.35% and 19.12% for 2011 and 2012 respectively. The larger increase for the first half of 2012 is attributed to increased voice call revenue and scrapping of the unlimited bundle. The latter was deemed as non-profit making.

Direct & Operating costs

These include the operating, general and administrative expenses (managerial, clerical, etc). This package contains salaries and other expenses used to run the organization as a whole. The above table shows that Safaricom’s expenses have increased over the years, with the largest jump made in 2011. According to their 2011 news release, the high costs were attributed to high inflation and rapid depreciation of the Kenya shilling. Depreciation turned up the heat by KES 1.4 Billion.

Profit before & After Tax

These parts of their statements are where the most important information lies. Amongst the key aims of conducting business is profit making. It’s what attracts investor’s attention, with the tax collector not too far behind. Profits before Tax dipped to KES 5.4 billion in 2011, a 48% decrease.  Last week the media houses painted the airwaves with the 113% increase in profits before tax. Comparing it to the results in 2010, the current profit is actually KES 1 billion above that.

The profit after tax followed the same trend. An initial dip of 47% to land at KES 4.01 Billion in 2011 followed by a 94% increase this year to land at KES 11.51 Billion. Compare this to the performance in 2010 and you’ll notice an actual profit of no more than KES 150 Million.

Earnings Per Share

This is calculated as the total earnings after tax divided by the number of outstanding shares. These figures basically speak for themselves. 2010 has thus far seen the highest yield at KES 0.193 per share. The figure this year stands at KES 0.19 per share. It is by all definitions of the word, a decreased return. Dividend payout however, does not follow the same logic. Safaricom is committed to making the payout progressive i.e. paying higher dividends every year. How they paid higher dividends when their profits after tax nearly halved, is a mystery.

How much will they be looking to pay now that they are back to their former profit?

The performance within these first six months was a target they had to meet if they were to return to their previous state. The strengthening of the Kenyan shilling and increased use of M-Pesa were useful in achieving this. Also, with such a large subscriber base, more gains would yield from Mobile termination Rates (MTR). Chances are high that you're going to dial a Safaricom number than any other network around. That said, MTR is quite the source of revenue for them. Their dividends will certainly be higher, but not double that of last year as some are speculating.

All said and done, their performance is a case of 4 steps back and 5 steps forward.