Safaricom #ticker:SCOM has disclosed a 50 percent ownership of M-Pesa after the firm and South Africa’s Vodacom acquired the mobile money platform from Britain’s Vodafone for Sh2.14 billion.
The Nairobi bourse-listed telecommunications firm says in its latest annual report that the two partners split the acquisition costs equally, earning each of them a 50 percent share in the newly created joint venture M-Pesa Global Services Limited.
The two companies partnered to acquire the M-Pesa business from their parent company Vodafone Group Plc, which held the intellectual property to the lucrative financial services platform.
“M-Pesa Global Services Limited is registered in Kenya. Safaricom Plc owns 50 percent of the issued share capital of the joint venture with Vodacom Group Limited owning the remaining 50 percent,” Safaricom says in its latest annual report for the year ended March.
The ownership structure gives Safaricom an equal say in the direction of the M-Pesa business, just like Vodacom, unlike before when the UK multinational fully owned the brand.
“Decisions by the joint venture to declare and/or pay any dividends or make any capital distribution to shareholders must have prior written consent of the existing shareholders,” notes Safaricom.
Safaricom recently appointed the head of its financial services division, Sitoyo Lopokoiyit, interim CEO of the M-Pesa joint venture.
Vodacom and Vodafone own a combined 40 percent stake in Safaricom, which pioneered the M-Pesa service in the local market.
The service has evolved from a basic mobile money transfer application into a fully-fledged financial service platform, offering loans and savings in partnership with local banks, plus merchant payment services and is eyeing the unit trust business.
It has grown to become the largest payments platform in Africa, with 40 million users and processes over a billion transactions every month, according to Safaricom and Vodacom’s joint statement.
M-Pesa is now available for subscribers in Kenya, Tanzania, Lesotho, the Democratic Republic of Congo, Ghana, Mozambique and Egypt.
Safaricom and Vodacom — which operates in South Africa and other markets in the region, including Tanzania — plan to grow the platform globally.
Vodafone, which owns five percent of Safaricom, will continue to earn royalties from M-Pesa.
Safaricom said the joint venture will allow the parties to consolidate M-Pesa platform development, synchronise more closely product road maps, and improve operational capabilities into a single, fully converged unit.
“The joint venture will drive the next generation of the M-Pesa platform — an intelligent, cloud-based platform for the smartphone age,” Safaricom said.
Safaricom booked a one-time gain of Sh3.3 billion in the year ended March in relation to the M-Pesa buyout.
The telecoms operator said the gain is attributed to the intrinsic value of the M-Pesa brand previously unrecognisable due to the ownership structure.
M-Pesa, which started as a person-to-person money transfer service in March 2007, recorded a 12.6 percent growth in revenue to Sh84.4 billion in the review period, accounting for a third of Safaricom’s annual sales.
In the short term, however, Safaricom is losing billions of shillings from the waiver of fees on transactions of below Sh1,000.
The relief is part of measures aimed at easing financial pressure on citizens in the wake of the Covid-19 pandemic.
Safaricom is currently eyeing the Ethiopian market that has for long operated with strict regulations, locking out foreign companies.
The Ethiopian government recently came up with new regulations which essentially say that only majority Ethiopian-owned companies can offer mobile money services. This deals a blow to Safaricom’s prospects unless the regulations are changed.