Safaricom expects free M-Pesa transfers to be lifted end of year

What you need to know:

Safaricom removed all charges on small peer-to-peer transfers in March to facilitate cashless payments during the Covid-19 pandemic.

Kenya’s biggest telecoms operator, Safaricom #ticker:SCOM, expects to be able to end coronavirus-related price cuts at its M-Pesa business at the end of the year, its CEO said on Tuesday.

M-Pesa, which is used to send money, save, borrow and make payments for goods and services, is one of the most popular modes of payment in Kenya. At the end September it had nearly 27 million active users in a population of 47 million.

Safaricom, part-owned by South Africa’s Vodacom and Britain’s Vodafone, removed all charges on small peer-to-peer transfers in March to facilitate cashless payments during the Covid-19 pandemic.

The move was ordered by the central bank, which also directed commercial banks to remove charges on customers’ cash transfers to mobile wallets until the end of the year.

“We have not seen anything that says it should be longer,” Safaricom CEO Peter Ndegwa told Reuters.

Safaricom’s core first-half earnings dropped 10.5percent year on year, hit by a 14.5percent decline in M-Pesa revenue.

Talks with the central bank are ongoing, Mr Ndegwa said, adding that the company may yet cut prices for some M-Pesa services after volumes rose significantly during the pandemic.

Safaricom has also been focusing on its data business to offset the M-Pesa revenue drop, offering 60,000 customers financing to buy 4G phones in an effort to boost usage.

“More than half of our handsets in the market are 2G,” Mr Ndegwa said. “Our intention is to migrate a lot of those 2G handset holders into 4G-enabled handsets.”

The company aims to increase the proportion of smartphones on its network to 70 percent over time, from current penetration of less than 20 percent.

It is also expanding its 4G network to cover all of the country by the end of this year, from 90 percent coverage last month.

Safaricom, which is bidding in a consortium with Vodafone and Vodacom for one of two mobile phone operator licences on offer in Ethiopia, will hold 51 percent of the new operator if its bid is successful, Mr Ndegwa said.