Plans to split Kenya’s biggest telco are still ongoing, the Central Bank of Kenya (CBK) has maintained.
CBK Governor Kamau Thugge said at a post-Monetary Policy Committee (MPC) briefing Wednesday that a road map for the split of the telcos’ business units is still on, although there is a pending tax matter.
“The separation of M-Pesa and Safaricom is still the plan because the Central Bank of Kenya must be able to oversight M-Pesa. There are some complications, I think, in terms of the amount of tax Safaricom will have to pay because of that separation,” Dr Thugge said.
“I know Safaricom is engaging the National Treasury to see how that can be dealt with, but yes, the plan is still on.”
The Kenya Kwanza administration has committed to having Safaricom split into standalone business units.
“Effective immediately after forming the government, the administration will seek the break-up of Safaricom Ltd into two distinct and separate business entities with a mobile telecommunications institution under the direct jurisdiction of the Communications Authority and the financial institution firmly under the jurisdiction of the Central Bank of Kenya,” reads part of the ruling coalition’s manifesto.
Kenya’s biggest telco has, however, raised fears that the planned split of its M-Pesa unit would lead to higher tax obligations.
Safaricom has often opposed the planned split, arguing that it would force it to create a new company to run M-Pesa, with the new entity taking with it both financial and physical assets, which would attract a 30 per cent income tax.
Safaricom argued, in May this year before Parliament, that the split would disadvantage both the new firm and its shareholders.
“This transfer has not been occasioned by Safaricom, it’s actually been occasioned by regulatory pressure by Central Bank of Kenya,” said PWC’s Associate Director Edna Gitachu on behalf of Safaricom in a petition to Parliament at the time.
“These two companies will ultimately be owned by the same shareholders, so our prayer is that as the transfer of assets is happening, it should be at a tax-neutral position so that we do not have tax being a hindrance to the regulatory requirement by the Central Bank of Kenya.”
A distinct M-Pesa unit with all the rights to operate like a traditional bank would give commercial lenders a run for their money if regulators act on their controversial pledge.
This is according to analysts and insiders at Safaricom, who believe the looming separation would enable the company to deepen its financial services. They argue that the move would position Safaricom from a useful technology partner for incumbent banks into a worthy non-traditional adversary.
If the fresh clamour to break apart telco’s money units as a separate business from the telecoms service is successful, Safaricom and its smaller rivals Airtel Kenya and Telkom Kenya would be required to form separate entities to manage any other business they engage in outside telecommunications services.
They would then be licensed to only offer voice, data and SMS services by the telecommunications regulator, the Communications Authority of Kenya (CA), while mobile money services such as M-Pesa would be licensed by the banking regulator, akin to banks.
Airtel and Telkom have already received the nod from the banking regulator to operate separate units.