Kenya’s leading mobile service provider Safaricom is planning to roll out its successful mobile money service M-Pesa to other markets outside East Africa. Currently, M-Pesa enjoys a dominant market position in its home base in Kenya and some of its East African neighbors.
This news comes hot on the heels of UK’s Vodafone Group selling 35% stake in the telecom to its South African subsidiary, Vodacom. Although the transfer of shares is subject to shareholder and regulators’ approval, it would be safe to assume it is a done deal. When the deal goes through South Africa’s Vodacom will be set it back some $2.6 billion.
The Kenyan government owns 35% stake at Safaricom. The telecom says it has given “appropriate assurances” to Kenya’s government on the deal. Vodafone will maintain a 5% stake at Safaricom, with 25% being free floated for trade at the securities market.
According to a financial analyst Aly-Khan Satchu based in Nairobi while talking to Quartz, said the deal is lucrative for both companies and will go a long way in consolidating their combined reach to markets across Africa.
“I think by consolidating the African businesses, you could apply scale and target these markets to make a wider opening to Vodacom and Safaricom.”
Vodacom puts up its case for buying into Safaricom as a move that will give it access to a market that has “high growth, high margin, high cash generation business.” According to Shameel Joosub, the Vodacom Group’s CEO.
Since its launch in 2007, M-Pesa has been a cash cow for Safaricom and has grown to serve over 29 million people in and outside Kenya. The mobile money has users across 10 countries across Africa, Asia, and Europe. Vodacom hopes to leverage on the Safaricom strategy to encourage adoption of M-Pesa across its business networks.
Just last week, Safaricom announced a Ksh. 70.4 billion pre-tax profit; mainly boosted by its growing mobile money service market base. For the year ending March 2017, revenue generated by M-Pesa to Safaricom grew by 32.7% to Ksh. 55 billion ($567 million).
The possible jitters within M-Pesa
From the surface, all seems impressive with M-Pesa but upon in-depth look. You will discover that just recently there was a leaked report commissioned by the Communications Authority of Kenya, suggesting M-Pesa should be split from Safaricom’s voice and data services. The platform transacts billions of dollars annually, and the country’s treasury sees it as a “plausible fiscal risk.”
Such matters are probably what pushed Safaricom to allow its agents to host other services alongside M-Pesa. The telecom is further rooting for an all network mobile money transfer services.
The buyout of Vodafone stake by the Africa-based Vodacom makes more sense
According to Satchu, the buyout of the UK-based Vodacom by the South African Vodacom makes more sense from a corporate point of view.
“It makes sense to try and get some of the acceleration that we have seen in Safaricom complemented to Vodacom South Africa.”
Should Vodacom decide to go it alone, it will likely to struggle against other bigger South African rivals, like the MTN. Though there was a time in 2016 when Vodacom overtook MTN as the most valuable telecom operator on the continent. The two, MTN and Vodacom, have been engaged in a legal battle for a while now. This battle has been over a non-compete clause that followed MTN poaching of Vodacom’s CEO.