In Kenya, M-Pesa is more than just a mobile money app; it is crucial to the economy. It is the main way to pay for things like school fees, salaries, groceries, and government services. The Kenyan government is now asking an important question: What happens when the company that owns M-Pesa also runs the whole network?
This issue is at the heart of a long-standing battle to separate Safaricom, the main telecom company, from M-Pesa, its well-known financial service. The Central Bank of Kenya (CBK) is pushing to make the two separate companies. Safaricom and its big shareholders, such as Vodacom, oppose this idea. They argue that it’s like trying to separate conjoined twins who depend on each other.
This isn’t just a corporate argument; it is about the future of Kenya’s digital economy. Billions of dollars and the stability of the entire nation are at stake.
The Government’s Case: Why Break Up a Success Story?
At first glance, the government’s action seems strange. Why disrupt the world’s most successful mobile money system? The case for splitting up Safaricom relies on two main points: dominance and risk.
1. The “Dominance” Argument (The Un-Level Playing Field)
Safaricom is not just another mobile network in Kenya; it dominates the market. The Communications Authority of Kenya (CA) has identified Safaricom as a “Dominant Player.” This means Safaricom controls:
- Over 65% of the mobile subscriber market.
- Over 90% of the mobile money market with M-Pesa.
The government argues this gives Safaricom an unfair advantage. How can competitors like Airtel Money succeed when Safaricom controls both the network (SIM cards, data, USSD codes) and the financial service (M-Pesa)? There is concern that Safaricom can use its power to eliminate any competing service. By forcing a split, the government aims to create two separate companies:
- Safaricom (The Telco): This would be regulated by the Communications Authority, like Airtel and Telkom.
- M-Pesa (The Bank): This would become an independent financial company, regulated by the Central Bank of Kenya (CBK), like Equity Bank or KCB.
This separation should help level the playing field, allowing M-Pesa to serve all network customers fairly, not just Safaricom users.
2. The “Systemic Risk” Argument (The “Too Big to Fail” Problem)
This is the government’s strongest point, tied to national security. M-Pesa is so vital that it has become a key part of Kenya’s financial system. The money handled by M-Pesa is a large portion of the country’s GDP.
Regulators worry about a potential disaster. What if Safaricom’s network experiences a major failure? A fire in a data centre? A significant cyberattack? If the network goes down, Kenya’s entire financial system would freeze. Salaries wouldn’t be paid, and people couldn’t buy groceries.
And as if to prove the regulator’s point, we get small, scheduled previews of this very chaos. In 2024, Safaricom had to announce a temporary, nationwide M-Pesa outage for a planned system upgrade.
It was only for a few hours in the dead of night, but the very fact that it was headline news, forcing Kenyans to “plan ahead” and “complete urgent transactions”, is the perfect evidence. That single, planned outage is a polite, real-world reminder of the regulator’s deepest fear: what happens if the next outage isn’t planned?
The Central Bank believes this risk is unacceptable. A payment system so crucial cannot depend on a single mobile company. It needs to be an independent, strong financial entity.
Safaricom & Vodacom’s Position: “You Can’t Un-Scramble an Egg”
Safaricom and its main shareholder, Vodacom, have a clear response. They argue that M-Pesa is “too intertwined” with their core business. This relationship is not just a “partnership”; it’s like one unit.
This isn’t just a “partnership”; it’s a single organism.
1. The “Intertwined” Infrastructure
M-Pesa was never set up as a separate bank. It was created as a part of the Safaricom network.
- The Agents: Over 300,000 M-Pesa agents work in small shops across the country. These agents also sell Safaricom airtime and SIM cards. How can you separate this network?
- The Technology: M-Pesa operates on Safaricom’s systems, including its USSD platform, data centres, and core network.
- The Brand: For many Kenyans, “Safaricom” and “M-Pesa” mean the same thing. The trust in one is shared with the other.
One analyst compared this situation to trying to separate the App Store from the iPhone. It just wouldn’t work. You’d end up with two broken, inefficient companies.
2. The “Cost of Success” Argument
Safaricom claims this “intertwined” model is why M-Pesa is successful, affordable, and forward-thinking. M-Pesa relies on the telco’s existing costs. It shares marketing, staff, customer service, and infrastructure. If you separate it, the new M-Pesa bank would have to create all these systems again, from data centres to HR.
These extra costs would likely fall on customers. This means that the affordable service that helps millions could become more expensive, more complicated, and less innovative.
A Decade-Long Fight
This battle has been ongoing for many years. The government made its first serious move in 2017 after a report by advisory firm Analysys Mason, which recommended separating the services.
Safaricom has managed to fend off these efforts for years by agreeing to some regulatory requests, like allowing agents to serve both M-Pesa and Airtel Money customers, as well as enabling pay-bill services to work across different systems.
However, M-Pesa has continued to grow larger. The concerns about risks to the financial system are now more significant than ever.
The government, led by the Central Bank, is making a stronger push now. This situation is no longer just about competition among telecom companies; it’s about the stability of the country’s financial system.
The outcome of this conflict will shape the future of the market:
- The Government’s View: They want an open and competitive market with clear boundaries separating finance and telecom services.
- Safaricom’s View: They believe in a combined system where finance and telecom work together, making services more efficient and cheaper for everyone.
The result will not only impact one company. It will also influence the entire model of Africa’s digital economy.
