Safaricom PLC is planning a joint venture with South Africa’s Vodacom to buy the full intellectual property rights to M-Pesa from UK’s Vodafone which holds a 5 percent stake in Safaricom.
According to Safaricom’s Chief Executive, Bob Collymore, the deal, which is approximately 1.34 billion shillings will allow both telcos to make substantial savings in terms of royalties paid to Vodafone in a bid to expand M-Pesa services to new African markets.
“We are taking ownership of M-Pesa, the brand, and the intellectual property. Joint ownership between us and Vodacom and we then use that as a platform into running into other markets across the continent,” Collymore said in an interview with Reuters.
Safaricom pays 2 percent of its annual M-Pesa revenue to Vodafone. In the recent financial year for the period ended March, the revenue from M-Pesa stood at 75 billion shillings.
Vodacom, which owns 35 percent of Safaricom, pays 5 percent in an intellectual property fee to Vodafone from its M-Pesa business, which is mainly in Tanzania.
“More important than the significant savings is about us determining the future, the roadmap of M-Pesa because at the moment the roadmap is determined by Vodafone,” Collymore reiterated.
He also added that given that the bulk of the M-Pesa business is in Africa, between Tanzania and Kenya, the decision lies mainly with Safaricom and Vodacom.
The M-Pesa rights buyout will enable the two telecommunication companies to concentrate on developing local products easily. This includes services like Safaricom’s Fuliza.
Consequently, Safaricom and Vodacom are looking to expand their presence in the African market.
Bob Collymore cited Ethiopia, where economic liberalization plans put in place by a new prime minister last year have left firms scrambling to position themselves for entry.
“We are watching Ethiopia closely because as we see the liberalization of the markets, both the mobile payments market, the telecoms market, and the banking sector, we think there could be opportunities,” he said.
The planned joint venture for a buyout of the M-Pesa right still requires regulatory approvals from both countries where the telcos are headquartered; Kenya and South Africa.
“We are putting everything in place just subject to getting the right approvals,” Collymore said adding that the joint venture should be set up and the deal with Vodafone completed this year.