Vodacom Group, the parent company of Safaricom PLC, has firmly rejected the possibility of splitting its lucrative M-PESA fintech platform from its telecommunications unit and listing it separately on the stock market. This decision comes despite the mounting regulatory pressure in Kenya for such a separation.
Vodacom Group CEO Mohamed Joosub explained to investors that the financial services business is intricately linked to the company’s core value proposition, enhancing its voice and data offerings and creating synergy that would be difficult to dismantle.
This stance distinguishes Vodacom from rivals like MTN Group, which is proceeding with plans to separate and list its mobile money business in Uganda after the plans received shareholder approval to spin off mobile money operations into MTN Mobile Money (U) Limited (MTN MoMo). The MoMo unit will be significantly held by MTN Group Fintech Holdings B.V.
In Kenya, the push for a separation is being led by the Central Bank of Kenya (CBK) and the National Treasury. Treasury officials have proposed splitting Safaricom into three distinct units: a telecommunications firm, a tower operator and M-PESA, a process that could also involve reducing the government’s 35% stake in the company.
The CBK believes that hiving off M-Pesa would allow for more effective oversight of the multi-billion-shilling transactions it processes, placing it under direct banking supervision while the telecoms unit remains under the ambit of the Communications Authority of Kenya (CAK). However, a significant hurdle as noted by the CBK governor Dr. Kamau Thugge, is the substantial tax liability, estimated at roughly KES 75 billion, that such a move would trigger.
Despite the pressure, Vodacom, which owns a 35% stake in Safaricom PLC through Vodafone Kenya Limited, sees a greater value in keeping the entities unified. Mr. Joosub emphasized that M-PESA is closely coupled with the company’s loyalty and customer offerings, creating a unique and difficult to replicate advantage over a standard telecommunications operator. The financial success of this integrated model is clear from Safaricom’s recent performance.
For the six months to September, the company recorded a 11.1% rise in revenue to KES 199.9 billion, with M-PESA itself growing by 14% to KES 88.1 billion. M-PESA now accounts for 42% of Safaricom’s total revenue and is on course to generate half of it, underscoring its role as the company’s largest and fastest growing unit.
Vodacom’s Future Outlook
Looking ahead, Vodacom’s strategy is not to separate M-PESA but to deepen its offerings within the existing structure, particularly by expanding into the insurance sector. Mr. Joosub indicated that the company plans to leverage the capabilities and platforms built through its large insurance business in South Africa for expansion into key markets like Kenya and Tanzania.
This approach stands in direct contrast to path being taken by MTN Uganda, where the fintech unit is being transformed into a separate entity with the explicit goal of a standalone listing on the Uganda Securities Exchange (USE) within the next three to five years. MTN Uganda was listed at the USE in 2021, and a proposed listing of its mobile money unit would push the number of listed firms at the USE to more than 20.
For now, Vodacom remains committed to its integrated model, betting on the continued synergistic growth of its telecommunications and financial services arm.
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