Kenya’s largest telco, Safaricom, is not particularly keen on splitting M-PESA, its mobile money services platform, from the rest of its business. The telco’s CEO, Peter Ndegwa, explains that such a move will be done if it’s beneficial to either its customers or investors.
He notes that the board has not yet decided on the split adding that there’s no pressure for such a move. “If we do it, we will do it because we want to proactively do it and it serves a purpose either for investors or customers,” Peter Ndegwa said in a recent interview.
While other telcos have already split their telecommunications and mobile money services business – Airtel Africa Plc and South Africa’s MTN Group have both separated their mobile money services – to either help raise money or help boost growth, Safaricom sees no strong cases for such a split.
“You’ve seen what Airtel and MTN have done. Have they gotten better valuations? Probably not. Have they raised more money? Yes, probably. Do we need more money? No, we don’t,” Peter Ndegwa previously said in an interview.
The Central Bank of Kenya (CBK) – which currently regulates M-Pesa – has been pushing for this split for a while now as it wants better oversight. Safaricom’s data and voice offerings (telecommunications part of the business) are regulated by the Communication Authority of Kenya (CA).
Kenyans continuously depend on M-Pesa for everyday payments. Last year, Kenyans transacted a total of Ksh40.2 trillion ($306.89 billion) on M-Pesa. This growth in its position in the country’s economy has prompted the CBK and Treasury to raise concerns over the implications of a total collapse of M-Pesa or frequent outages to the economy.
Ksh75 million tax question
Given there’s a potential Ksh75 million tax liability if the split goes through, it makes sense why Safaricom is stalling. The company has always preferred an internal reorganization that will see a new holding structure created to house both the telecommunications and mobile money services within the Safaricom group. Currently, the two operate separately but with no formal separate formal structures.
Important to note the CBK and the National Treasury will be in talks with Safaricom’s board to address the Ksh75 million tax question as per the CBK governor, Kamau Thugge. In addition, the Finance Bill 2024 is expected to address this issue.
However, it remains unlikely these developments will help smoothen this process over and entice Safaricom to go for the split. Peter Ndegwa has said that such a move would be considered if it adds value to its customers or investors.
“At the moment, no decision has been made in terms of breaking and there’s no pressure from any source in terms of splitting,” Peter Ndegwa said.
