Higher M-Pesa revenue likely to fuel company split debate

In Summary
  • M-Pesa revenue which dropped by 2.1 per cent to Sh82.6 billion surpassed voice earnings
  • Already a Bill has been tabled in the Parliament to effect the separation
Safaricom CEO Peter Ndegwa speaks during the release of the financial results for the year ended March 31, 2020.
Safaricom CEO Peter Ndegwa speaks during the release of the financial results for the year ended March 31, 2020.

M-Pesa emerged as Safaricom's top revenue earner, upstaging voice for the first since it was pioneered in 2oo7, according to the telcos full year financial results. 

This is likely to accelerate the push to have Mpesa operate as a separate entity from Safariom, a demand that  is already before parliament in the form of a Bill.

There are already indications that Safaricom is moving towards this direction with the appointment of Sitoiyo Lopokoiyit as the Managing Director o Safaricom Africa.

He is also the Chief Financial Services Officer at  Safaricom

The Kenya Information and Communications (Amendment) Bill sponsored by Gem MP Elisha Odhiambo is pushing for the split.

The Bill seeks to address concerns that Safaricom has become too big through its dominant market share in voice, mobile data and mobile money.

If passed, telecommunication firms with existing businesses will within six months of the law coming into force ensure that the business is compliant

A member of the Information Communication and Technology Committee in the National Assembly who sought anonymity due to sensitivity of the split debate said the move will bring fairness in the sector.

''Numbers don't lie. It is dangerous for a company to command communication and financial sectors of a country,'' he said.

Mpesa's detachment from Safaricom is likely to deny it the added advantage that attracts customers and keeps them retained to the provider.

According to the results for the year ended March 31, 2021 released Thursday, M-Pesa revenue which dropped by 2.1 per cent to Sh82.6 billion surpassed voice earnings which narrowed 4.6 per cent to Sh82.55 billion. 

The two segments were hit by Covid-19 effects, with  the government waiver on transaction fees on amounts less than Sh1,000 to cushion families against economic shocks of the virus.

Financial constrains arising from the pandemic also saw mobile phone users cut on calls, affecting voice earnings. 

Currently, Safaricom controls about 65 per cent market share in voice while its mobile money business accounts for over 90 per cent of the total market share. 

Last month, a Safaricom linked consortium tendered to enter the Ethiopian market, a move that is likely to extend M-Pesa growth in the continent. 

If successful, it will  compete with the country's sole mobile operator, Ethio Telecom which  launched a mobile phone money transfer service on Wednesday. 

Mobile financial services have become a significant part of African telecom operators' businesses after since  Safaricom pioneered  with M-Pesa in 2007, giving people an alternative to banks.

The new service, telebirr, will mark a shift for Ethiopia, where the banking system is seen as inefficient with 19 commercial banks serving a population of about 115 million.

The company aims to attract 21 million users for the service in its first year of operations, rising to 33 million in five years.

Investors who were enthusiastic when Safaricom made the Ethiopian bid retreated yesterday after the firm reported its first ever profit drop in two decades and on news about telebirr launch.

The firm's share at the Nairobi bourse dropped two per cent hours of announcing  financial results to trade Sh39.30 compared to Sh40.60 on Wednesday. 

The telco posted a 6.8 per cent drop in full-year net earnings on reduced M-Pesa and voice revenue.

In the results posted Thursday, the Telco posted an after-tax profit of Sh69.7 billion in the year ended March 31, 2021, compared to Sh73.6 billion.

“We remained resilient in a disruptive year, demonstrating strong operational capacity, diligence and commitment in supporting the country, our customers and shareholders through this uncertain time," said Peter Ndegwa, Safaricom CEO.

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