Kenyan legislators have reignited their campaign to compel Safaricom, the leading telecommunications provider in the country, to segregate its lucrative mobile money arm, M-PESA, from its core telecom operations. The revival of the campaign is marked by the reintroduction of the Information and Communications (Amendment) Bill of 2022, which advocates for the division of Safaricom into two distinct entities. The intent behind this legislative move is to enhance regulatory oversight and diminish Safaricom’s prevailing market influence.
The bill had previously encountered a roadblock in the Kenyan parliament due to a lack of substantial support, with only a pair of lawmakers endorsing it. Should the bill gain approval, it would mandate Safaricom to legally carve out M-PESA as an independent business entity, a prospect that Safaricom has staunchly opposed.
M-PESA’s significance in the market is underscored by its 31.3 million active users and the remarkable $312 billion (KES 40.2 trillion) worth of transactions it processed between March 2023 and March 2024. The legislative and regulatory bodies in Kenya argue that the separation of Safaricom’s businesses is essential to ensure equitable competition and to bolster regulatory management.
The proposed legislation stipulates that while a company can engage in diverse businesses, it must legally bifurcate its telecom operations from its other ventures. Safaricom, however, has defended its consolidated business approach, asserting that it delivers shareholder value. In contrast, Safaricom’s rivals, MTN and Airtel Africa, have already partitioned their telecom and mobile money services, with Airtel Money emerging as the fastest-growing segment post-separation and MTN Group securing a lucrative $5.2 billion agreement with Mastercard.
Peter Ndegwa, the CEO of Safaricom, has expressed skepticism regarding the advantages of detaching M-PESA, suggesting that such a move would not align with Safaricom’s valuation aspirations or financial objectives. Safaricom has also raised the alarm about the potential tax implications of a split, projecting a possible tax liability of KSh 75 billion ($582 million), which surpasses its net profit of KSh 52.48 billion ($407.24 million) in 2023.
Despite Safaricom’s objections, the Central Bank of Kenya (CBK) continues to advocate for the split, aiming to refine its regulatory capabilities over M-PESA transactions. Presently, the CBK supervises M-PESA, while the Communications Authority of Kenya (CA) oversees telecom services. A separation would grant the CBK more direct oversight of M-PESA, aligning with its regulatory enhancement objectives in the mobile money market.
Amidst the ongoing debate, Safaricom has disclosed its strategy to form a holding company (Holdco) by 2025, which would amalgamate its diverse business units, including M-PESA, under a single corporate entity. This proposed restructuring might serve as a middle ground, preserving the integrated business model while addressing some regulatory concerns.
