Safaricom, Vodafone strike deal on M-Pesa licence fees

NAIROBI: Safaricom executives have struck a deal with the Vodafone, the telecom’s UK parent company, to slash the multi-billion-shilling licence fees the M-Pesa money transfer platform attracts.

One of Vodafone’s subsidiaries owns the intellectual property rights on M-Pesa, and earns between 10 and 11 per cent of the revenues generated by the platform in a deal entered into in 2007, which capped the fee at 25 per cent.

Bob Collymore told The Standard that the negotiated deal would be presented to the Safaricom board of directors for consideration before it is made public.

“We have finished the negotiations of a revised fee and will be presenting it to our board,” Mr Collymore said.

He was in the team representing Safaricom in the negotiations to make the case for a rate reduction, following pleas by shareholders, including the Government, which has a 35 per cent stake in the telco.

“I am not at liberty to talk about the deal offered to Safaricom, and now it is up to the board to accept or reject it,” he said.

Both Safaricom and Vodafone are listed and, therefore, guided by capital market regulations in how material information is disseminated.

One of the reasons Safaricom would be expecting a rate reduction is that the M-Pesa servers have been relocated to Kenya and are effectively under the telco’s management.

The servers had been hosted in Germany since the platform’s launch in 2007, and were maintained by Vodafone at a cost of about Sh750 million a year. They migrated to Kenya in the company’s last financial year at a cost of about Sh7 billion; a move expected to eliminate the platform’s downtimes.

M-Pesa has been a major revenue spinner for Safaricom, generating more than Sh32 billion in the last financial year alone.

As a result, Vodafone has been earning as much as Sh3.5 billion from the Kenyan telco a year in expenses, which shareholders would be glad to have slashed to hopefully translate to bigger profits at home. The new licence contract is likely to put a single-digit lower limit on fees.

However, Collymore has said in previous interviews that a rate reduction would not automatically translate to cheaper tariffs on the platform, meaning the anticipated gains would accrue to the firm and its shareholders, at least in the near term.