Kenyan lawmakers have reignited the debate surrounding Safaricom, the country’s largest telecommunications company, by reviving the 2022 Information and Communications (Amendment) Bill. The proposed law, which had previously faltered due to a lack of backing, seeks to legally split Safaricom from its highly successful mobile money platform, M-PESA.
The renewed efforts come amid growing pressure from regulators to break up the telecom giant, which many believe holds too much power in both the telecommunications and mobile money markets.
What the Proposed Law Entails
The revived amendment seeks to enforce a legal separation between Safaricom’s core telecommunications services and its other business ventures, notably its mobile money platform, M-PESA. The bill stipulates that any company engaged in telecommunications must separate its telecom services from other business lines.
“In addition to operating a telecommunications system or providing telecommunication services, a person may engage in any other business provided that such person shall legally split or separate the telecommunications business from such other businesses,” the bill reads.
If passed, this legislation would force Safaricom to spin off M-PESA into a standalone company. This change, aimed at curbing Safaricom’s market dominance, is backed by several lawmakers and regulators who argue that a split would introduce more competition into the Kenyan telecom and mobile money markets, ultimately benefiting consumers.
Why Safaricom Resists the Split
Safaricom, however, has consistently resisted efforts to split M-PESA from its core operations, arguing that its integration with M-PESA gives it a strategic advantage. The telco has positioned itself as an innovator by offering a seamless combination of telecommunications and financial services through its platform, making it the largest player in both sectors in Kenya.
Safaricom CEO Peter Ndegwa has also questioned the rationale behind splitting the business, pointing out that other companies like MTN and Airtel, which have separated their mobile money operations, have not necessarily reaped better valuations. He emphasized that Safaricom does not need additional funding, unlike its competitors.
“You’ve seen what Airtel and MTN have done. Have they gotten better valuations? Probably not. Have they raised more money? Yes, probably. Do we need more money? No, we don’t,” Ndegwa stated in May.
The Numbers Behind M-PESA’s Success
M-PESA, launched in 2007, is Kenya’s largest and most successful mobile money platform. From March 2023 to March 2024, the service boasted 31.3 million active users and processed over $312 billion (KES 40.2 trillion) in transactions. The platform accounts for nearly half of Safaricom’s total revenue, underscoring its crucial role in the company’s financial performance.
Safaricom’s ability to integrate M-PESA with its telecommunications services has given it an edge in both sectors, which is why the company has strongly opposed any move to separate the two businesses. Additionally, Safaricom has warned that a forced separation could result in a massive tax liability, estimating a potential bill of $582 million (KES 75 billion)—a figure that would surpass its 2023 net profit of KES 52.48 billion.
Regulatory Push for More Oversight
One of the key driving forces behind the push for Safaricom’s separation is the Central Bank of Kenya (CBK), which currently regulates M-PESA. The CBK has argued that separating M-PESA from Safaricom would enhance its ability to oversee mobile money transactions more effectively. Meanwhile, the Communications Authority of Kenya (CA) continues to regulate Safaricom’s telecommunications arm.
The CBK’s position is supported by concerns over Safaricom’s market dominance and the growing need for regulatory clarity in the rapidly expanding mobile money market. By having a standalone M-PESA entity, the central bank hopes to introduce more competition in the sector and improve overall regulatory oversight.
Comparisons with MTN and Airtel: Lessons Learned
The idea of splitting mobile money operations from telecom businesses is not new in Africa. MTN Group and Airtel Africa, two of Safaricom’s largest competitors, have already made similar moves. Airtel Money was separated from its parent telecom in 2021 and has since become the company’s fastest-growing division. MTN also hived off its mobile money operations and later inked a $5.2 billion deal with Mastercard, highlighting the potential financial opportunities that can emerge from such a separation.
However, Safaricom remains unconvinced that such a move would benefit its shareholders. CEO Ndegwa has stated that splitting off M-PESA would not necessarily bring in better valuations, citing examples from MTN and Airtel, where revenue growth was seen, but not necessarily higher market valuations.
The Road Ahead: Holdco Structure by 2025
While Safaricom remains opposed to the idea of splitting M-PESA, the company has announced plans to set up a holding company (Holdco) in 2025. Under this new structure, M-PESA will become a subsidiary alongside other divisions such as voice, data, and messaging services. This organizational shift may address some concerns from regulators while maintaining Safaricom’s integrated business model.
The Holdco structure could also allow for clearer reporting lines, making it easier for the Central Bank of Kenya to oversee M-PESA’s activities without forcing a complete split from the telecom business.
Conclusion: What’s at Stake for Safaricom and Kenya
The revived Information and Communications (Amendment) Bill has reignited debates over market dominance, regulatory oversight, and competition in Kenya’s telecom and mobile money industries. As Kenya’s largest telecom company, Safaricom wields considerable influence, and any move to split M-PESA from its business will have far-reaching consequences.
For regulators and lawmakers, the separation represents an opportunity to level the playing field and improve regulatory oversight. However, for Safaricom and its shareholders, the split presents risks, from potential tax liabilities to the loss of strategic advantages. As lawmakers push forward with the revived bill, the outcome could reshape not just Safaricom, but the entire landscape of mobile money in Kenya.
