Sh30.8 billion deal to purchase M-Pesa rights

Saturday May 25 2019

 

By The Citizen Reporter @TheCitizenTZ news@tz.nationmedia.com

Dar es Salaam. Kenya’s Safaricom and Vodacom are to buy out M-Pesa intellectual rights for $13.4 million (Sh30.8 billion), in a deal that would see the revolutionary mobile financial services platform rolled out in more African markets.

 Safaricom CEO Bob Collymore revealed plans were afoot to buyout the rights from Vodafone in Britain. He was speaking to Reuters news agency in an interview.

He noted the buyout will also save the operators millions of dollars in royalties. Safaricom and Vodacom pay 2 and 5 percent in intellectual property fees to Vodafone, respectively.

An expansion plan for the mobile money tool into new African markets is also on the cards. “We are taking ownership of M-Pesa, the brand, and the intellectual property … and we then use that as a platform into running into other markets across the continent,” said Collymore.

 

Ethiopia is likely the first major target in the M-Pesa expansion as the country makes major economic liberalisation reforms. 

“We are watching Ethiopia closely because as we see the liberalization of the markets, both the mobile payments market, the telecoms market and the banking sector, we think there could be opportunities,” Collymore told Reuters.

Mr Collymore said the detachment from Vodafone will allow Safaricom and Vodacom determine the future M-Pesa roadmap.  Vodafone holds a 5 percent stake in Safaricom.

“Given that the bulk of the M-Pesa business is in Africa, between Tanzania and Kenya, it is right for us to be determinants,” Collymore said.

 While Safaricom operates the mobile financial services platform in its home country, Kenya, Vodacom M-Pesa business is mainly in Tanzania.

Subject to regulatory and shareholder approvals in South Africa and Kenya, the acquisition plan will allow the partners to more easily develop local products, Collymore said, citing Fuliza – an M-Pesa overdraft facility launched in Kenya in January – as an example.

M-Pesa is a mobile phone-based money transfer, financing and microfinancing service, launched in 2007 by UK-based Vodafone for Safaricom and Vodacom, the largest mobile network operators in Kenya and Tanzania, respectively.

Reuters reported that the blacklisting of Chinese tech giant Huawei by the United States could be another reason for the M-Pesa takeover bid.

Based on the widespread use of Huawei’s products by Kenya’s government and other leading telcos, there is concern the ban could affect the African country’s market.

Moreover, there are likely implications for future smartphone sales and the cost of network equipment as it could reduce the number of suppliers, which is already limited.

In a note on Safaricom, Standard Investment Bank explained that while the Huawei issue is still developing, the concern is on whether its British parent firm, Vodafone, will look to take a similar position like its US counterparts on dealing with Huawei.