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M-Pesa earnings surge to rival voice as Safaricom fights split of its business

By Macharia Kamau | November 5th 2019 at 11:00:00 GMT +0300

Tuma na ya kutoa, which loosely translates to (send cash plus withdrawal fee) has become a popular phrase at the end of many conversations, when individuals agree to deal and settle payments through mobile money.

For Safaricom, the ya kutoa bit of the M-Pesa transaction is not just part of a Kenyan lingo but what is slowly becoming its mainstay.

The fee that subscribers pay to the telco to use its mobile money platform has over the last 12 years grown from zero to a multi-billion-shilling revenue stream.

It is seems set to topple voice and become Safaricom’s largest revenue contributor.

During the six-month period to September, M-Pesa revenues stood at Sh41.97 billion, growing 18 per cent from Sh35.52 billion last year.

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This is in comparison to voice, whose revenues stood at Sh46.87 billion, a decline from Sh47.53 billion.

M-Pesa earnings account for 32.3 per cent of the total revenue of Sh129.9 billion, which is almost comparable to voice revenue’s contribution at 36 per cent.

It is against this backdrop that Safaricom is up in arms over a proposal to amend the Kenya Information Communication Act, which if passed, would compel it to separate its mobile money business from the traditional telecommunication business.

While the proposal is not clear on what shape such a separation would take, Safaricom holds that the two businesses are complementary and taking one away would weaken the other.

“We are concerned about proposed amendments to the Kenya Information and Communication Act now before Parliament which would require businesses such as ours to separate their GSM and mobile money businesses,” Safaricom Chairman Nicholas Ng’ang’a told an investor briefing last Friday.

“The proposed amendments do not support the growth of the industry and seek to address issues that may be better managed by allowing market dynamics to thrive. Prescriptive legislation of that nature may end up dampening the investor markets and we would therefore urge caution.”

Separating M-Pesa from the other Safaricom businesses might be detrimental for the other revenue streams, especially voice and messaging which are already on a decline.

While M-Pesa might still be an attraction, there are numerous options for voice and messaging and might see further and substantial reduction in revenues.

The Bill will require the likes of Safaricom and the telecommunication players to “legally split or separate the telecommunication businesses from such other business”.

The Kenya Information and Communications (Amendment) Bill, 2019, currently undergoing a public participation phase, will require service providers operating in diverse business areas to clearly separate their operations by creating new entities and obtaining new licences.

“The principal object of this Bill is to amend the Kenya Information and Communications, Act (Cap. 411A) to enable persons operating a telecommunication system or providing a telecommunication service to engage in any other business and provide for the separation of such other businesses from the telecommunication business,” said Gem MP Elisha Odhiambo in the memorandum accompanying the Bill.

This means service providers will have to carve off their mobile money business, for example, and register the new entities with the Central Bank of Kenya (CBK).

Safaricom, Airtel and Telkom Kenya would have to separate their mobile money offering from their core telecommunication activities to create new companies with separate accounts regulated by the CBK.

The Bill gives the telcos six months from the date it is signed into law to effect the separation.  

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