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Safaricom: M-Pesa acquisition positive for Africa expansion, licence fees remain

  • Safaricom and Vodacom completed M-Pesa acquisition from Vodafone via joint venture, with Safaricom paying EUR19mn

  • Ethiopia remains the best target for M-Pesa expansion, but is currently constrained by foreign ownership restrictions

  • Licence fees remain payable at 2% of M-Pesa revenue; reiterate Buy on SAFCOM

Tracy Kivunyu
Tracy Kivunyu

Equity Research Analyst, Telecoms

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Tellimer Research
7 April 2020
Published byTellimer Research

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.