Aug 15, 2011

M-Pesa earns Vodafone sh1.8 Billion in 2010/2011 in licence fees

Britain’s Vodafone has earned Sh1.6 billion ($15.6 million) or seven per cent of money transfer revenues from Safaricom’s mobile money transfer service, M-Pesa, in the past four years, making it the biggest beneficiary of the telecoms giant’s fastest growing business line, according to the Business Daily.

These payments were made to Vodafone Sales and Services Ltd (VSSL), which owns proprietary rights to the M-Pesa innovation.
Photo credit: The East African

These transfer pricing payments account for 2 per cent of Safaricom’s revenues of sh80 billion. But to earn from the innovation, Vodafone had to license it to Safaricom and changed the agreement from a profit share to one based on revenues and subscriber numbers in 2009.

 M-Pesa earned Sh11.78 billion in commissions, having transferred Sh76 billion last year. M-PESA earned Safaricom sh370 million in 2008.

As more Kenyans rely on M-Pesa to transfer money, Vodafone, which owns the M-Pesa Solution, is earning more from licensing the innovation to Safaricom.

Vodafone’s licence fee is based on the number of active subscribers multiplied by a service fee that reduces with an increase in number of active subscribers. But the agreement also includes a clause that, should the number of subscribers decline, Vodafone will be paid a fee not less than 10 per cent of the revenue M-Pesa services generate quarterly. Safaricom has successfully grown M-Pesa since the service was launched in March 2007 to 14 million subscribers.

Following M-PESA's success in Kenya,Vodafone has rolled out the M-PESA service in other markets such as Tanzania and Afghanistan. 
Photo credit: The EastAfrican