Safaricom, Vodacom to acquire $13 million M-Pesa purchase rights

The 13.4 million dollar deal will make room for both purchasers to make significant savings in royalties paid to Vodafone
mpesa kenya
Photo taken 23 April 2007 shows a man talking into his mobile phone at an M-pesa shop. A pioneering mobile phone service called M-Pesa, in Kenya’s capital, Nairobi, [Pesa being swahili for money] has sky-rocketed in popularity for its low costs and convenience as users can send and receive money from remote areas through a mobile handset and at onlt a fraction of the cost of sending money through banks, courier and money transfer services. AFP PHOTO/TONY KARUMBA (Photo by TONY KARUMBA / AFP)

Kenya’s Safaricom will start a joint venture with Vodacom to acquire intellectual property rights to the popular M-Pesa mobile financial services platform from Britain’s Vodafone, Safaricom’s CEO, Robert Collymore, announced on Thursday.

The 13.4 million dollar deal will make room for both purchasers to make significant savings in royalties paid to Vodafone and expand the service to new African markets, Collymore says.

“We are taking ownership of M-Pesa, the brand and the intellectual property. Joint ownership is between us and Vodacom and we then use that as a platform into running into other markets across the continent”, he adds.

Safaricom, the most profitable company in East Africa, pays 2% of its annual M-Pesa revenue to Vodafone. Revenue from M-Pesa stood at 75 billion shillings ($741 million) in Safaricom’s financial year to the end of March.

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Vodacom, a South African operator which owns 35 percent of Safaricom, pays 5% in an intellectual property fee to Vodafone from its M-Pesa business, which is mainly in Tanzania.

“More important than the significant savings, is about us determining the future, the roadmap of M-Pesa because at the moment, the roadmap is determined 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 says.

The acquisition of the intellectual property rights by the new joint venture will allow the partners to develop local products more easily.

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Fuliza, which is operated jointly with two local banks, has garnered 8.8 million users who have borrowed a combined 45 billion shillings, Safaricom said earlier this month.

Apart from developing new products based on the M-Pesa platform, Safaricom and Vodacom also want to launch into other African markets such as Ethiopia, where economic liberalization plans put in place by a new prime minister last year, have left firms scrambling for entry.

“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 adds.

Vodafone holds a 5% stake in Safaricom.

Safaricom’s plan to form a joint venture with Vodacom and acquire the intellectual property rights to M-Pesa still requires regulatory and shareholder approvals in South Africa and requires regulatory approval in Kenya.

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The joint venture and deal with Vodafone is slated for completion this year.

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