Safaricom Financial Analysis

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE RESEARCH

Financial information analysis refers to the process and technique used to identify and extract the critical information contained in the financial statements and any supporting documentation (O’Regan, 2006). Information contained in these statements is critical for analysis and interpretation of the financial performance of a given entity. However, the financial statements are not sufficient for decision-making in their typical form and further analysis is needed before they can be relied on. Financial analysis enhances this by identifying trends through ratio analysis, which then allow the user to draw meaningful conclusions. Broadly conceived, the job of financial analysis is composed of two parts, evaluating the past and the present and projecting and planning for the future (Robert H. Wessel, 1961)

Financial information is important especially to the shareholders of an entity. They expect a return on their investments measured by the profitability of the company and could take the form of dividends, bonus issues, rights issues and exercising options and warrants.

For over four decades, since Africa achieved its independence, the continent’s telecommunications system was under developed. Making local calls was a painful and frustrating business and successful international calls were often celebrated as minor miracles. Africa’s fixed line networks have generally deteriorated rather than improved. The reasons include lack of physical infrastructure on which to lay networks, short-sighted government regulations, state-owned monopolies and a host of other impediments meant that the vast sums needed for investment could not be found. Then the cell phone revolution began (Anver and Ford, 2007).

The African mobile telecommunications sector is widely regarded as one of the continent’s most successful industries. While state-owned fixed lines telecoms companies failed to satisfy expectations on demand and...