Kenyan lawmakers have reignited efforts to separate Safaricom, the country’s leading telecommunications company, from its mobile money unit, M-PESA.
This move comes despite Safaricom’s opposition to the split, arguing that it would add no value to shareholders.
The Information and Communications (Amendment) Bill of 2022, if passed, would force Safaricom to create a standalone M-PESA entity.
This would reduce the company’s market dominance and allow for increased regulatory scrutiny.
The bill had previously stalled in the Kenyan parliament due to insufficient support, with only two lawmakers voicing their approval.
M-PESA, one of the world’s largest mobile money platforms, has over 31 million active users in Kenya and processed transactions worth $312 billion (Ksh 40.2 trillion)between March 2023 and March 2024.
The bill stipulates that companies offering telecommunications services must legally separate their telecommunications business from any other ventures.
Safaricom has consistently maintained that integrating M-PESA with its telecommunications business provides a strategic advantage. However, regulators and lawmakers have pressured the company to split, citing concerns about market dominance.
The Central Bank of Kenya (CBK) has been advocating for a complete separation to enhance its oversight of M-PESA transactions. In contrast, the Communications Authority of Kenya (CA) regulates Safaricom’s telecommunications operations.
Safaricom’s Chief Executive Officer (CEO), Peter Ndegwa, announced in May that the company plans to establish a holding company in 2025 with divisions for its various business lines. Under this new structure, M-PESA would become a subsidiary within the same business as data, voice, and messaging.
Mr Ndegwa emphasized that separating M-PESA would not necessarily lead to higher valuations or more fundraising. He also highlighted the potential for a significant tax liability, estimating a $582 million (KSh 75 billion) bill if a split were to occur, which would dwarf its 2023 net profit of KSh 52.48 billion ($407.24 million).