Safaricom’s parent company, Vodacom, has ruled out splitting M-Pesa from the telecommunications unit and listing it separately at the stock market amid regulatory pressure.
Vodacom Group CEO Mohamed Joosub told investors during a Monday earnings call that the financial services business provides extra value to voice and data users, making it difficult to separate the fintech from the telecoms unit.
Investors sought to understand if the firm would follow rivals like MTN Group, which is separating Uganda’s mobile money business from the telecoms operation as it seeks to list the fintech separately on the Uganda Securities Exchange within the next five years.
In Kenya, the Central Bank of Kenya (CBK) has been pushing to have the cash-spinning mobile-money arm of Safaricom, M-Pesa, hive off.
Recently, the Treasury talked of a proposal to separate Safaricom into three units as part of a process that may include reducing the State’s 35 percent stake in the mobile-phone operator.
But Vodacom, which owns 40 percent of Safaricom, reckons there is value in the fintech and the telecom’s arm operating as a single unit.
“We’re not looking to separately list the financial service businesses; we do see it intricately linked to our value proposition that we’re providing to the customer,” Mr Joosub said.
“In fact, we see it more closely linked and then coupling that with loyalty going forward… The positioning for us is that we have something very different to offer from a normal telco,” he added.
Vodacom Group, also the parent to Vodacom South Africa, Tanzania and Egypt, has witnessed faster growth of its fintech arm, which generated annual revenues of Sh$2.2 billion (Sh284 billion).
Since its 2007 launch, M-Pesa has grown in double digits and is on course to generate half of Safaricom’s revenue.
Safaricom reported a 52.1 percent rise in its half-year profit to Sh42.7 billion, helped by a smaller loss in Ethiopia and M-Pesa’s double-digit growth.
Safaricom’s revenue rose to Sh199.9 billion in the six months to September, from Sh179.9 billion in the same period a year earlier, reflecting a 11.1 percent growth.
Revenue from M-Pesa rose to Sh88.1 billion from Sh77.2 billion previously, reflecting a growth of 14 percent.
It is now the firm’s largest unit and accounts for 42 percent of revenues.
Treasury Cabinet Secretary John Mbadi said an assessment had found that there would be “a huge benefit” to the State from splitting the company into a telecommunications firm, a tower operator and its popular mobile-payments platform M-Pesa.
A final plan on breaking up the company and a reduction in the government’s stake has yet to be agreed and would require Cabinet approval to be implemented, Mr Mbadi said in September.
The CBK would like to see a Safaricom-M-Pesa split to better supervise the multi-billion shilling deals the mobile money platform processes, while leaving the telecoms business under the Communication Authority of Kenya’s oversight.
“One of the factors that has been delaying the delinkage of M-Pesa mobile money from the rest of Safaricom is the tax liability, which is fairly significant in the order of roughly Sh75 billion and what to do with it,” CBK Governor Kamau Thugge said earlier.
Vodacom reckons that it wants to deepen M-Pesa’s offering in Kenya, with its eyes on getting a larger piece of the insurance business. “So an example would be in South Africa, we have a very big insurance business and a lot of capabilities and platforms that we built,” Mr Joosub said.
“So now we’re using that as a centre of excellence to expand into more markets with Kenya and Tanzania being the two markets that we’ll focus on.”
In Uganda, MTN is splitting off its fintech unit into a separate entity and aims to list it on the local bourse in three to five years.
Under the reorganisation, MTN Uganda’s mobile money fintech business will be transformed into a separate entity majority-owned by MTN Group Fintech Holdings B.V, the fintech arm of MTN Group.
The goal is to see the independent fintech business list separately on the Uganda Securities Exchange (USE), alongside MTN Uganda, within a three- to five-year period.
