Safaricom and Vodacom have completed the acquisition of M-Pesa from Vodafone through a newly-created joint venture (JV). Safaricom paid EUR19mn, which equates to 0.8% of its reported FY 19 revenue and 4% of PAT.
The acquisition gives both Vodacom and Safaricom full control of the M-Pesa brand, product development and support services as well as the opportunity to expand M-Pesa into new African markets. Safaricom has discussed expanding its financial services on M-Pesa, including insurance and wealth management products.
Safaricom will now pay licence fees of 2% of M-Pesa revenue to the joint venture holdings company (previously paid to Vodafone).
We believe the best opportunity for M-Pesa expansion would have been in Ethiopia, where Safaricom is seeking to acquire a telco licence. However, this is currently constrained by restrictions in operating mobile financial services by foreign-owned companies.
We are therefore positive on M-Pesa expansion, neutral to this development for Safaricom overall and retain our Buy recommendation.