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Safaricom is taking over M-Pesa Holding Company Limited from London-based Vodafone Group Plc. M-Pesa holds hundreds of billions of shillings powering its mobile money service. The company which is listed at Nairobi Securities Exchange will pay the British multinational, top shareholder will pay a token amount of $1 in the deal to receive regulatory approvals in the next few weeks.
Safaricom is taking over M-Pesa Holding Company Limited from London-based Vodafone Group Plc. M-Pesa holds hundreds of billions of shillings powering its mobile money service. The company which is listed at Nairobi Securities Exchange will pay the British multinational, top shareholder will pay a token amount of $1 in the deal to receive regulatory approvals in the next few weeks.
The transaction has the potential to boost Safaricom’s cash flows besides earning the company interest income through an investment of part of the M-Pesa war chest in short-term securities.
In April the group entered into an agreement to sell M-Pesa Holding Company Limited (‘MPHCL’) to Safaricom Plc, an associate entity of the group. No material gain or loss is expected to arise on disposal. Completion of this transaction is subject to various approvals which are expected to be obtained before or during July 2023. M-Pesa Holding keeps customer funds in trust for the benefit of M-Pesa customers. It acts as the independent trustee for M-Pesa customers, independently administering the trust and holding all funds in the mobile money service.
M-Pesa Holding is also a cash cow on its own, holding and investing hundreds of billions of shillings on a short-term basis amid rapid growth in customer deposits as well as transaction volumes and values. Vodafone says M-Pesa Holding had short-term investments of €1.247 billion as of March 31, 2023. It also held M-Pesa customer funds amounting to €1.226 billion. Balances included in the group’s consolidated financial statements for M-Pesa Holding on 31 March 2023 include short-term investments of €1,247 million and €1,226 million due to M-Pesa customers, recorded within Other investments and Other creditors, respectively, stated Vodafone. The multinational added that any profit generated by M-Pesa Holding is currently donated for use for public charitable purposes only after defraying direct costs. It remains to be seen whether the same policy on the use of profits will be retained under Safaricom’s control.
The Kenyan telco has been doing a lot of business with M-Pesa Holding as part of its mobile money service which has evolved from a person-to-person cash transfer platform to offer payments and credit among others. The company sold services worth Sh96.8 billion to M-Pesa Holding in the year ended March 2022, according to its latest available annual report. This was an increase from Sh73.3 billion the year before. M-Pesa Holding owed Safaricom Sh1.16 billion in the review period, down from receivables worth Sh2.29 billion at the close of the prior year.
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The transfer of M-Pesa Holding to Safaricom marks the telco’s increased control of the major aspects of the mobile money service which was pioneered in Kenya but whose intellectual property was previously held by Vodafone. Safaricom and South Africa’s Vodacom Group Limited in March 2020 teamed up to acquire the M-Pesa brand from Vodafone at a cost of Sh2.1 billion. The companies now hold the mobile money brand in their joint venture firm M-Pesa Africa which is registered in Kenya and which they own on a 50/50 basis. The move saved Safaricom significant licence fees it was paying to the UK firm to use the brand.
