M-Pesa seen as bigger outfit after Safaricom split

M-Pesa seen as bigger outfit after Safaricom split

Analysts have tipped mobile-money platform M-Pesa to grow into a large fintech behemoth if the unit spins-off from Safaricom.

According to analysts at Genghis Capital, the split of M-Pesa from Safaricom and its subsequent solo listing on the Nairobi Securities Exchange (NSE) will unlock more value for the payments platform.

M-Pesa’s potential for growth is seen as greater than that of Safaricom’s traditional voice business while the embedding of the payments platform to Safaricom’s voice business is seen as a handbrake to its growth.

“Such a corporate action will be timely as it will allow further monetization of M-Pesa as a fintech platform- from mobile to a broader fintech proposition, and there are a number of growth areas,” Genghis Capital analysts said in a note last week.

“For instance, transitioning mobile payments from offline to online is a growth area. For instance. Basically, M-Pesa is currently a service that is stored on the simulated internal memory card (SIM) issued by Safaricom. In advanced markets, payment gateways such as Wechat Pay, Alipay, Paypal, Amazon Pay or Stripe allow users to link their wallets to their bank accounts directly.”

Further the listing of M-Pesa on the NSE bourse as a standalone stock is expected to unlock more value for Safaricom shareholders.

The management of Safaricom however stands in opposition of a proposed M-Pesa spinoff and expects to retain the connection, leveraging data on both businesses to grow revenues.

The spin-off of M-Pesa from Safaricom was first carried out under the Kenya Information Communications (Amendment) Bill last year.

Members of Parliament (MPs) however snubbed a debate on the bill which had proposed the breaking up of Safaricom to check its market dominance.

Other telcos on the continent including Airtel Africa and MTN Group have however mulled the spin-off with the latter reporting last week that it was working with advisers at JPMorgan Chase on the planned separation of its financial technology business.

For the moment, M-Pesa is tipped to remain Safaricom’s key revenue driver over the medium term with the Genghis analysts tipping the platform to return revenues of Ksh.116.2 billion for the financial year which ended March 31.

At the same time average revenue per user (APRU) is tipped to grow to Ksh.391.25 from Ksh.256.74 last year.

Genghis places the valuation of M-Pesa at Ksh.646.4 billion ($5.6 billion) which places the platform’s valuation above that of fintech’s Flutterwave, Opay, Wave, Interswitch and Fawry.

 

 

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Safaricom M-Pesa

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