Vodacom and Safaricom are in the process of buying the M-Pesa brand from parent company Vodafone, in a deal reportedly worth over R190 million.
Vodacom mentioned the deal in its recent full year results announcement, saying it expected the acquisition of the popular mobile money service to “further accelerate our mobile money growth plans in Africa”.
Vodacom group CEO Shameel Joosub confirmed the plans in an interview with ITWeb, saying Vodacom, through a joint agreement with Safaricom, has done a deal with Vodafone to “take over M-Pesa completely”.
“So, Safaricom and Vodacom will own M-Pesa and the teams and everything that goes with it. Now what we want to do is put the requisite investment in place, and then grow it. So, we want to grow the platform and we will use elements of the platform even in South Africa,” he said.
In 2016, Vodacom pulled the plug on its M-Pesa operation in SA.
When asked why Vodafone, which owns a 64.5% stake in Vodacom, would want to sell the M-Pesa brand, Joosub responded: “Because I convinced them.
“We can get more out of it and we want to capitalise it properly and really make sure we can put a lot of focus behind it; and really most of M-Pesa is Africa so essentially it’s us driving it,” he added.
Safaricom CEO Bob Collymore confirmed the deal in an interview with Reuters, saying the two groups would take over ownership of M-Pesa, the brand and the intellectual property.
“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 in the interview.
According to Reuters, the deal is worth EUR12 million (R193 million) and will let both Safaricom and Vodacom make significant savings in royalties paid to Vodafone and expand the service to new African markets.
Joosub said operations running M-Pesa at the moment would continue to use the service but would now pay a fee to Vodacom and not Vodafone.
The extremely successful mobile money business is offered in Vodacom territories Lesotho, Mozambique, the Democratic Republic of Congo and Tanzania, as well as in Kenya through Safaricom and in Ghana on Vodacom’s footprint. Vodafone also operates the service in Egypt and India, which will now be taken over by Vodacom and Safaricom.
Vodacom said in its financial results, for the year ended 31 March, that M-Pesa revenue in its international operations had grown by 32% year-on-year to R3.1 billion. According to Safaricom’s financial results for the same period, M-Pesa revenue had grown by 19.2% to 75 billion Kenyan shillings (R10 billion).
Reuters says Safaricom pays 2% of its annual M-Pesa revenue to Vodafone, while Vodacom, which owns almost 35% of Safaricom, pays 5% in an intellectual property fee to Vodafone from its M-Pesa business.
The acquisition of the M-Pesa brand and intellectual property rights is still subject to regulatory and shareholder approvals in both SA and Kenya.
Joosub confirmed that after the deal is done, the group plans to roll out M-Pesa-as-a-service in other markets as well, with Ethiopia at the top of the list.
Ethiopia last year became the continent’s most sought-after investment opportunity for mobile operators after the government in June 2018 said it would allow private domestic and foreign investment in state-owned telecoms, aviation, shipping and power companies after decades of state control.
At the time, both MTN and Vodacom expressed interest in expanding their operations into the Ethiopian market.
Joosub said Vodacom expects the Ethiopian government to start the process of issuing telecommunications licences in September.
“They are issuing two new licences as well as a privatisation play, which will happen later for the current [government-owned] Ethio Telecom.”
He confirmed Vodacom will apply for a licence in Ethiopia but said “every man and his dog will be trying to get a licence” as it is one of the last big untapped markets in Africa, with a population of 110 million people.
Joosub believes M-Pesa can play a role in its planned Ethiopian business as “one of the key plays would be the mobile money play as part of our offering there”.