M-Pesa enjoys unrivalled lead in money transfer, says report

Safaricom’s money transfer service, M-Pesa, has a clear market leadership and is poised to be the primary non-voice revenue driver for the telco, a new research shows.

Citigroup Global Markets Inc. notes that M-Pesa’s market leadership faces very little competition from the companies offering similar services in the industry, while its full potential is far from being realised.

“We expect M-Pesa and data (currently 18 per cent and 8 per cent of the company’s revenue respectively) to be the key growth drivers for Safaricom. M-Pesa active users are still just 56 per cent of Safaricom’s subscriber base, with good scope to continue growing in our view.

“We also think average revenue per user expansion can continue as Safaricom stimulates increased usage and services such as Lipa Na M-Pesa (payments to merchants) gain traction,” said the report.

MOBILE MONEY MARKET

Citigroup says that Safaricom’s brand strength, systems and footprint positions the company well to maintain its grip on the mobile money market and achieve sustained growth over the medium-term.

The survey pointed out the high revenue share the telco has in the Kenyan market as a tool it can use to extend the lead in service provision as it expands its presence in the market.

Safaricom has a revenue market share in excess of 85 per cent and leads with wide margin in almost all the market segments, the study adds.

Apart from riding on the wave of Safaricom’s 68 per cent subscriber base, M-Pesa is also said to have stolen the show from would-be competitors through innovations. The introduction of bill payment services and credit provision via M-Shwari, over and above the core money transfer services, have put the mobile money service above the rest and is likely to remain so according to the research.

Launched in 2007, M-Pesa has enjoyed great success, having grown its users to over 19 million — 72 per cent of the market — and over 80,000 agents across the country.

UNFAIR COMPETITION

Last year, a ruling by the Competition Authority of Kenya against Safaricom saw its exclusivity agreement with M-Pesa agents declared null and void. In addition, the watchdog nullified Safaricom’s levy of extra charges on competitors that use its mobile money network. This is after Airtel filed a petition accusing Safaricom of unfair competition practices.

Kenya has 32 million mobile subscribers, implying a SIM penetration rate of 78 per cent. Subscriber growth has averaged over 13 per cent a year over the past four years, though the run-rate has slowed in the past two years.

In Africa, where mobile service penetration averages 35-40 per cent, Kenya ranks among the top 10. About 99 per cent of subscribers are on the prepaid platform.