Kenya’s mobile network operator Safaricom, along with its South African counterpart Vodacom, has disclosed plans to buy out the intellectual property rights of renowned mobile financial services platform, M-Pesa.
The purchase deal, worth $13.4 million, is aimed at saving the buyers significant amounts in royalties paid to Vodafone in Britain. From their annual M-Pesa revenues, Safaricom and Vodacom pay 2 and 5 percent in intellectual property fees to Vodafone, respectively.
An expansion plan for the mobile money tool into new African markets is also on the cards. “We are taking ownership of M-Pesa, the brand, and the intellectual property … and we then use that as a platform into running into other markets across the continent,” Safaricom’s CEO, Bob Collymore told Reuters.
The economic liberalisation plan in Ethiopia has made it a particularly attractive option for M-Pesa expansion, as several financial firms across the continent try to position themselves for entry into the Horn of Africa country.
“We are watching Ethiopia closely because as we see the liberalization of the markets, both the mobile payments market, the telecoms market and the banking sector, we think there could be opportunities,” Collymore said.
The CEO further explained that a more important factor behind the purchase decision aside savings and expansion is about both companies being able to determine the future and roadmap of M-Pesa, which at the moment is controlled by Vodafone.
“Given that the bulk of the M-Pesa business is in Africa, between Tanzania and Kenya, it is right for us to be determinants,” Collymore said. While Safaricom operates the mobile financial services platform in its home country, Kenya, Vodacom M-Pesa business is mainly in Tanzania.
Subject to regulatory and shareholder approvals in South Africa and Kenya, the acquisition plan will allow the partners to more easily develop local products, Collymore said, citing Fuliza – an M-Pesa overdraft facility launched in Kenya in January – as an example.
M-Pesa is a mobile phone-based money transfer, financing and microfinancing service, launched in 2007 by UK-based Vodafone for Safaricom and Vodacom, the largest mobile network operators in Kenya and Tanzania, respectively.
Vodafone holds a 5 percent stake in Safaricom and apart from the issue of M-Pesa deal between the Kenyan telecoms company and its British parent firm, another cause of concern is the recent blacklisting of Chinese tech giant Huawei by the United States.
Based on the widespread use of Huawei’s products by Kenya’s government and other leading telcos, there is a possibility the ban could affect the African country’s market. Moreover, there are likely implications for future smartphone sales and the cost of network equipment as it could reduce the number of suppliers, which is already limited.
In a note on Safaricom, Standard Investment Bank explained that while the Huawei issue is still developing, the concern is on whether its British parent firm, Vodafone, will look to take a similar position like its U.S. counterparts on dealing with Huawei.
