VENTURES AFRICA – Vodafone has earned Sh1.9billion ($23 million) from an agreement pact it made with its associate company, Safaricom, Kenya’s leading telecommunications company.
Safaricom paid its parent company, Vodafone, through its mobile money service payment- M-Pesa- in form of license fees as provided in the pact the two companies signed five years ago at the launch of the mobile money platform. Vodafone has a forty percent stake over M-Pesa through Vodafone Sales and Services Limited (VSSL).
Besides the license fees, Vodafone will earn Sh3.5 billion ($41.5 million) in dividends for its 40 per cent stake in the Kenyan associate – which make a total of Sh5.4 billion ($64.1 million) in the first quarter of this year.
Having signed the deal in 2007, the five year deal ended on the 22nd of February. However, the company signed another agreement that extended the deal for another five years. Bob Collymore, the CEO of Safaricom affirmed that the contract extension was signed with the Vodafone on a modified agreement while the license fee remains unchanged.
With the number of M-Pesa subscribers on the rise from 14.01 million subscribers last year to 14.9 million in March,2012, the payout to Vodafone moves closer to the lower threshold. Analysts had hoped that Safaricom and Vodafone would sign a hybrid agreement since M-pesa is now more profitable than what it was five years ago. Safaricom has been able to increase the number of M-Pesa subscribers to 15 million since it launched the service in March 2007.
M-Pesa over the years has been able to sharpen competitive edge of Safaricom in the Kenya telecommunication market. “The licence fee is the fruit of an innovation that has turned out well,” said Eric Musau, an analyst with Standard Investment Bank, adding that in Kenya, mobile money transfer service has grown faster than in any other market.