Companies

Vodafone takes home Sh2.3bn of M-Pesa revenue

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Safaricom CEO Bob Collymore (right) with former boss Michael Joseph during the release of the company’s financial results on Tuesday. Photo/SALATON NJAU

British telecoms giant Vodafone Plc is the biggest beneficiary of Safaricom’s super profits after pocketing more than Sh2.3 billion from money transfer service M-Pesa.

Safaricom paid Vodafone the money in the form of licence fees as provided for under an agreement that the two companies signed before the launch of the mobile money platform five 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 two years.

The UK firm is estimated to have pocketed Sh2.3 billion of the Sh21.8 billion revenue that Safaricom generated from M-Pesa in the year to March, reflecting a growth of 29.4 per cent.

The revenue-sharing agreement makes Vodafone the biggest beneficiary of Safaricom’s fastest growing business line, pushing its total earnings to Sh7.2 billion after accounting for Sh4.9 billion dividend the firm will be paid for its 40 per cent stake in the Kenyan telco.

Bob Collymore, the CEO of Safaricom, defended the payout and said Vodafone was reaping from its ownership of the revolutionary money transfer service.

“We pay for the platform because it belongs to them. What we do is connect to it and our payments are to reimburse costs incurred by Vodafone for maintaining and operating the service,” said Mr Collymore in an interview with the Business Daily on Tuesday.

“The people working on M-Pesa service are Vodafone staff in Germany, the UK. Safaricom does not have people working on M-Pesa.”

Vodafone owns the M-Pesa concept and has introduced it in eight countries including Kenya, India, Tanzania, and South Africa.

The firm has been earning royalties of between 10 per cent and 25 per cent from M-Pesa’s annual revenues since February 23, 2007, under a five-year agreement. The company extended the payment structure last February under the same terms.

Vodafone’s Sh5.1 billion earnings from Safaricom makes it one of the key commercial interests which prompted the UK government to make a U-turn on its relations with Kenya after the election of Uhuru Kenyatta and William Ruto as President and Deputy President respectively.

London reviewed its policy a few months after its Nairobi High Commission said it would maintain only “essential business” with Mr Kenyatta’s government. Both Mr Kenyatta and Mr Ruto are facing crimes against humanity charges at the International Criminal Court.

Safaricom said its net profits rose 39 per cent to Sh17.54 billion as sales rose 16.6 per cent to Sh124.2 billion. It increased dividend 40 per cent to Sh0.31. 

(Read: Safaricom posts Sh17.5bn post-tax profit)

M-Pesa is seen as a pivotal arm of Safaricom’s operations which has helped sharpen the telecom giant’s competitive edge by locking in a huge chunk of subscribers in a market marked by cutthroat competition.

Safaricom has successfully grown M-Pesa since the service was launched in March 2007 to 17.1 million subscribers from 14.9 million last year.

M-Pesa is aiming at getting a larger share of the corporate business, especially transactions between businesses and individuals in the small and medium enterprises (SMEs) realm. Its footprint has increased to 65,547 agents from 39,401 last year.

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