Kenya’s Safaricom and South Africa’s Vodacom are planning to have a joint venture to acquire the intellectual property rights of MPESA from the British company, Vodafone.
Bob Collymore, Safaricom’s CEO revealed this to Reuters where he he said that the £10.5 million deal (Kshs 1.36 billion) will let both parties make significant savings in royalties paid to Vodafone and also expand the service to new markets.
Currently, Safaricom pays 2% of its annual MPESA revenue to Vodafone as royalties. MPESA accounted for 31.2% of Safaricom’s revenues last financial year which translated to roughly Kshs 75 billion shillings. This means Safaricom paid roughly Kshs 1.5 billion to Vodafone thanks to them holding the intellectual property rights to MPESA.
Vodacom in turn pays 5% as its intellectual property fee to Vodafone for its MPESA business, which is mainly in Tanzania. Vodacom currently is the joint top shareholder with the government of Kenya where they each have 35% of Safaricom’s shares. Vodafone has a minority 5% share of Safaricom.
Bob Collymore also revealed interesting details about the MPESA royalties conundrum. “ore important than significant savings is about us determining the future, the roadmap of MPESA because at the moment the roadmap is determined by Vodafone,” he said. “Given that the bulk of the MPESA business is in Africa, between Tanzania and Kenya, it is right for us to be determinants.”
The Safaricom CEO said that acquiring these rights will allow them to “easily develop local products” and of course venture into other markets. He pointed to Ethiopia specifically where thanks to its economic liberalization, he thinks there could be opportunities for the company in the mobile payments market, telecoms market and the banking sector.
This plan will still need regulatory and shareholder approvals from both companies in Kenya and South Africa. They plan to complete the deal with Vodafone this year.