Kenyan parliament pushes for Safaricom, M-PESA split

Kenyan lawmakers have revived the 2022 Information and Communications (Amendment) Bill, which seeks to split Safaricom, the country’s biggest telco from M-PESA its mobile money unit. A previous bid to change the law faltered after only two lawmakers backed it.

Regulators and lawmakers have pressured Safaricom to split its business and create two separate entities to reduce its market dominance and allow more scrutiny. If the bill passes, Safaricom will be forced to split M-PESA into a standalone unit, a move the telco has always opposed.

M-PESA, Kenya’s largest payment platform, had 31.3 million active users from March 2023 to March 2024, processing over $312 billion (KES40.2 trillion) in transactions during this period.

“In addition to operating a telecommunications system or providing telecommunication services, a person may engage in any other business provided that such person shall legally split or separate the telecommunications business from such other businesses,” says the bill.

Safaricom has maintained that separating its mobile money business would add no value to shareholders, resisting calls for a split. Unlike its peers, MTN and Airtel Africa, which have hived off their mobile money operations, Safaricom has argued that its integration with M-PESA is a strategic advantage.

In 2021, Airtel Money was separated from its telecom and has since become the fastest-growing division. South Africa’s MTN Group also made a similar move, closing a $5.2 billion deal with Mastercard afterward.

The Central Bank of Kenya (CBK) currently regulates M-PESA, while the Communications Authority of Kenya (CA) regulates the telco arm. The central bank has been pushing for a complete separation to enhance its oversight of M-PESA transactions.

In May, Peter Ndegwa, Safaricom CEO, told journalists that the company will set up a Holdco in 2025 with divisions of its various business lines. Under the new organisation structure, M-PESA, which accounts for nearly half of the telco’s revenues, will be a subsidiary in the same business as data, voice, and messaging.

“You’ve seen what Airtel and MTN have done. Have they gotten better valuations? Probably not. Have they raised more money? Yes, probably. Do we need more money? No, we don’t,” Ndegwa said in May.

Safaricom has also argued that it could face a huge tax liability if a split occurs. It said a $582 million (KES 75 billion) tax bill would be more than KES52.48 billion in net profit in 2023.