Safaricom has agreed to acquire M-Pesa Holding Company Limited, the firm that manages the funds for its mobile money service, from Vodafone Group Plc, a London-based multinational. To obtain regulatory approvals in the coming weeks, the exchange will entail Safaricom paying Vodafone a nominal sum of $1. This transaction could potentially enhance Safaricom’s cash flows, as well as increase the company’s interest income through short-term securities investments with part of the M-Pesa war chest.
Vodafone announced the deal on Tuesday when revealing its results for the year ending March, stating that “No material gain or loss is expected to arise on disposal. Completion of this transaction is subject to various approvals which are expected to be obtained before or during July 2023.”
M-Pesa Holding serves as an independent trustee for M-Pesa customers, holding all funds and administering the trust independently. Furthermore, it is a cash cow in its own right, holding and investing hundreds of billions of shillings in short-term deposits. According to Vodafone, as of March 31, 2023, M-Pesa Holding had short-term investments worth €1.247 billion and held M-Pesa customer funds worth €1.226 billion.
Safaricom has had a lot of business with M-Pesa Holding as part of its mobile money service, and it has evolved to offer payments and credit services, among other things. According to its latest available annual report, the company sold services worth Sh96.8 billion to M-Pesa Holding in the year ended March 2022, up from Sh73.3 billion the year before. M-Pesa Holding owed Safaricom Sh1.16 billion in the review period, down from receivables worth Sh2.29 billion at the end of the prior year.
The transfer of M-Pesa Holding to Safaricom marks the company’s increased control over the significant aspects of the mobile money service, which was pioneered in Kenya but whose intellectual property was previously held by Vodafone. In March 2020, Safaricom and South Africa’s Vodacom Group Limited formed a joint venture firm called M-Pesa Africa to acquire the M-Pesa brand from Vodafone for Sh2.1 billion.
Vodafone, which holds a 65.1% stake in Vodacom and a 5% indirect equity in Safaricom, transferred its 55% stake in Vodafone Egypt to Vodacom in December 2022 as part of the simplification of its African assets’ management.