No respite in M-Pesa tariffs as talks on fees begin

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Mr Collymore said that the negotiations with Vodafone were in early stages and that a decision as to whether Vodafone will accept to lower the fees or retain it will be known in July.

Telecoms operator Safaricom is negotiating a reduction of proprietary fees it pays United Kingdom-based firm Vodafone for M-Pesa even as it rules out any easing of consumer tariffs for the popular mobile money transfer service.

Bob Collymore, the Safaricom chief executive, said last Thursday that the telecoms operator had spent Sh7.1 billion to relocate M-Pesa servers to Kenya from Germany where they have been previously hosted and will be spending Sh752 million annually on maintenance.

“Safaricom has incurred capital costs to adapt the new server system to our requirements and to migrate customer data to it. We are also going to incur operating costs housing and running it. This means we cannot lower the tariffs now,” Mr Collymore said during the release of Safaricom’s full-year financial results last Thursday.

Mr Collymore said that the negotiations with Vodafone, the UK telecoms giant with a 40 per cent stake in Safaricom, were in early stages and that a decision as to whether Vodafone will accept to lower the fees or retain it will be known in July.

READ: Consumers defy rise in tariffs raising mobile cash to Sh2.1trn

Safaricom posted a Sh31.9 billion profit after tax for the year ended March and a total revenue of Sh163.4 billion. The telecoms operator earned Sh32.6 billion from M-Pesa or 15 per cent more cash than it earned from the service the previous year.

Vodafone is expected to at least earn Sh3.5 billion from M-Pesa in the form of licence fees as provided for in an agreement that the two companies signed before the launch of the mobile money service seven years ago.

The fee is payable quarterly and is capped at 25 per cent of every quarter’s revenue with a floor of 10 per cent, but Vodafone has been earning about 11 per cent of M-Pesa revenues over the past three years.

Safaricom said intellectual property rights that are jointly owned by Vodafone and Safaricom are unlikely to change even with the relocation of the servers locally.

The number of M-Pesa subscribers rose to 19 million by end of March 2015 from 14.9 million in 2012. The number of agents servicing the operation also rose to 85,756 from 39,401 in the review period.

M-Pesa posted a 14 per cent increase in 30-day active customers to 13.9 million — translating to 60 per cent of its total customer base. The M-Pesa Average Revenue Per User (ARPU) also increased 9.6 per cent to Sh209.08 from Sh190.76.

“M-Pesa, now contributes 20 per cent of total revenue, continues to be a significant driving factor in our growth,” Mr Collymore said.

Safaricom began the migration of M-Pesa servers from Germany to Kenya 24 months ago, having brought in 50 engineers from Vodafone, IBM and Huawei to do the job.

The new M-Pesa platform has the capacity to handle 900 transactions per second, up from 450 per second, a change that promises higher transaction speeds.

A higher processing capacity is also expected to enable Safaricom clients settle post-paid electricity bills, insurance premiums and bank payments in real time.

It currently takes 48 hours for payments made to Kenya Power to reflect on the electricity distributor’s data base while those made to the National Hospital Insurance Fund take 76 hours.

The new platform comes with additional functions that allow for M-Pesa’s integration with those of other vendors in banking, micro-insurance and retail sectors, especially supermarkets.

Vodafone has introduced the M-Pesa concept in a number of countries, including India, Tanzania and South Africa.

Last year, the Central Bank of Kenya granted Safaricom a licence that opened the door for M-Pesa to offer outward cash transfer services.

Vodafone last month signed a deal with MTN that allows their respective mobile money customers to transfer cash to each other across seven Eastern African countries.

The agreement enables M-Pesa users to send money through their mobile phones to recipients in seven African countries including Kenya, Tanzania, DRC and Mozambique, and MTN Mobile Money customers in Uganda, Rwanda and Zambia.