Safaricom has fully bought M-Pesa Holding Company Limited (MHCL) from the British multinational Vodafone International Holdings BV. The share purchase agreement has led to the transfer of 100% shareholding in M-PESA Holding from Vodafone BV to Safaricom.
As announced earlier in the year, Safaricom paid a token fee of $1. After receiving approval from shareholders and the relevant regulators, the deal was sealed. For Vodafone BV, there were no significant financial gains or losses upon disposal of its shares.
Previously, Vodafone BV was the top shareholder. This share transfer agreement came after Vodafone CEO Margherita Della Valle said the company was looking to simplify its business model saying the company is “cutting out complexity to regain our competitiveness”.
M-PESA Holding is the corporate trustee responsible for holding M-PESA funds under the M-PESA trust arrangement. Notably, it does not own M-Pesa. The company acts as the independent trustee for M-Pesa customers, independently administering the trust and holding all funds in the mobile money service.
The purchase will not only enhance Safaricom’s cash flows. It is an opportunity to generate interest income should Safaricom choose to invest M-Pesa user deposits in short-term securities. In the financial year ending March 2023, M-Pesa Holding had short-term investments adding up to Ksh185.3 billion.
The National Payment System Regulations, 2014 give room for the creation of a trust to manage funds held by a mobile money operator. As such, the trust can invest deposits it holds and generate an income.
Income from such investment should be donated to charity as previously done by Vodafone. However, the income generated can be used in any manner that aligns with the legislations of the Trust . According to the regulations, this would be subject to approval from the Central Bank of Kenya. Going forward Safaricom may take a different direction from Vodafone in terms of how its uses the profits generated.
Although M-Pesa was birthed and nurtured in Kenya, its intellectual property was previously owned by the British company. Vodafone had earned license fees from the use of the service until 2020 when Kenya’s Safaricom and South Africa’s Vodacom acquired Vodafone’s stake. This acquisition reported to cost Kshs 1.3 billion helped the 2 companies make significant savings in royalties paid to Vodafone.
Since then, Safaricom and Vodacom have had full control of M-Pesa’s products and brand. The mobile money brand is currently held by the companies through M-Pesa Africa, their joint venture firm. M-Pesa Africa is registered in Kenya, with an equal ownership split, 50/50. M-Pesa is currently available in 7 markets across Africa.