Safaricom has completed the acquisition of M-Pesa Holding Company Limited (MHCL) from Vodafone International Holdings BV for a token fee of $1. This marks a significant milestone for Safaricom, as it gives the company full control of the M-Pesa brand and intellectual property.
M-Pesa Holding is a corporate trustee that holds M-Pesa funds in trust for the benefit of M-Pesa customers. The company does not own M-Pesa, but it acts as an independent trustee to ensure the safety and security of customer funds.
Vodafone BV was previously the largest shareholder in M-Pesa Holding, a corporate trustee responsible for holding M-Pesa funds under the M-Pesa trust arrangement. The company does not own M-Pesa, but rather acts as an independent trustee for M-Pesa customers, administering the trust and holding all funds in the mobile money service.
The National Payment System Regulations, 2014 give room for the creation of a trust to manage funds held by a mobile money operator. As such, the trust can invest deposits it holds and generate an income. Income from such investment should be donated to charity, as previously done by Vodafone. However, the income generated can be used in any manner that aligns with the legislations of the Trust, subject to approval from the Central Bank of Kenya. Going forward, Safaricom may take a different direction from Vodafone in terms of how it uses the profits generated.
Previously, Vodafone BV was the top shareholder. This share transfer agreement came after Vodafone CEO Margherita Della Valle said the company was looking to simplify its business model saying the company is “cutting out complexity to regain our competitiveness”.
M-PESA Holding is the corporate trustee responsible for holding M-PESA funds under the M-PESA trust arrangement. Notably, it does not own M-Pesa. The company acts as the independent trustee for M-Pesa customers, independently administering the trust and holding all funds in the mobile money service.
The acquisition of MHCL is expected to have several benefits for Safaricom. First, it will enhance the company’s cash flows. M-Pesa Holding has over Ksh185 billion in short-term investments, which Safaricom can now use to generate interest income. Second, the acquisition will give Safaricom more control over the development and launch of new M-Pesa products and services. Third, it will allow Safaricom to expand M-Pesa into new markets more easily.
The acquisition of MHCL is also a positive development for M-Pesa customers. It ensures that Safaricom is fully committed to the development and growth of M-Pesa, and that customer funds are protected at all times.
Implications of the Acquisition
The acquisition of MHCL has several implications for the future of M-Pesa. First, it is likely to lead to a more rapid expansion of M-Pesa into new markets. Safaricom has already expressed its interest in expanding M-Pesa to more countries in Africa, and the acquisition of MHCL will give the company more resources and flexibility to do so.
Second, the acquisition is likely to lead to the development of new and innovative M-Pesa products and services. Safaricom is known for its innovative approach to mobile money, and the acquisition of MHCL will give the company more freedom to experiment and launch new products and services that meet the needs of its customers.
Third, the acquisition is likely to lead to lower M-Pesa transaction fees. Safaricom will no longer have to pay license fees to Vodafone for the use of the M-Pesa brand and intellectual property, which could lead to lower transaction fees for customers.
The acquisition of MHCL is a positive development for Safaricom, M-Pesa customers, and the African mobile money industry as a whole. It is a sign of Safaricom’s commitment to the development and growth of M-Pesa, and it is likely to lead to a more rapid expansion of M-Pesa into new markets and the development of new and innovative M-Pesa products and services.