Vodafone earns Sh1.3bn from M-Pesa charges

A customer pays for goods at a kiosk in Nairobi via M-Pesa. Safaricom increased the number of M-Pesa agents 73 per cent to 78,856 outlets. Photo/FILE/Salaton Njau 

By MARK OKUTTAH

In Summary

• Safaricom paid Vodafone the money in the form of licence fees as provided for under an agreement that the two companies signed before the launch of the mobile money platform five years ago.
• The fee is payable quarterly and is capped at 25 per cent of every quarter’s revenue with a floor of 10 per cent, but Vodafone has been earning about 11 per cent of M-Pesa revenues in recent years.
• Vodafone owns the M-Pesa concept and has introduced it in eight countries including India, Tanzania, and South Africa.

British telecoms giant Vodafone Plc is the biggest beneficiary of Safaricom’s super profit after pocketing more than Sh1.3 billion from M-Pesa, the money transfer service.

Safaricom paid Vodafone the money in the form of licence fees as provided for under an agreement that the two companies signed before the launch of the mobile money platform five years ago.

The fee is payable quarterly and is capped at 25 per cent of every quarter’s revenue with a floor of 10 per cent, but Vodafone has been earning about 11 per cent of M-Pesa revenues in recent years.

The UK firm is estimated to have pocketed Sh1.3 billion of the Sh12.5 billion revenue that Safaricom generated from M-Pesa in the six months to September, reflecting a growth of nearly 30 per cent given Vodafone earned Sh1 billion in the same period a year earlier.

The revenue-sharing deal makes Vodafone one the biggest beneficiaries of the telco’s fastest growing business line.

The M-Pesa revenues stood at Sh10.43 billion in the first half of last year, reflecting a growth of 19.8 per cent.

“M-Pesa continues to grow in its significance as a key revenue driver contributing to 18 per cent of total revenue,” said chief executive Bob Collymore.

“We deepened financial inclusion with the introduction of Lipa na M-Pesa service, which enables cashless merchant payments and facilitates trade between businesses and their customers while improving efficiency.”

Safaricom increased the number of M-Pesa agents 73 per cent to 78,856 outlets as the firm eyes a new platform that will allow users make bulk instant payments for corporate services such as salaries, pensions and bills.

Safaricom half year profit rose 44.9 per cent to Sh11.2 billion. The firm, however, did not pay an interim dividend in line with its tradition of sharing the profits with its shareholders at the end of the financial year.

READ: Safaricom half year net profit rises to Sh11.3bn

But Vodafone, which is the largest shareholder in the telco with a 40 per cent stake and which holds proprietary rights over M-Pesa,  has already got a piece of the earnings since fees on the money transfer service are paid quarterly.

Vodafone owns the M-Pesa concept and has introduced it in eight countries including India, Tanzania, and South Africa.

The firm has been earning royalties of between 10 and 25 per cent from M-Pesa’s annual revenues since February 23, 2007, under a five-year pact