Proof mobile money can make money? M-PESA earns serious shillings for Safaricom
by Mark Pickens: Monday, June 7, 2010
You want proof mobile money can make money? Look to M-PESA, which according to Safaricom’s annual financial statements released just a few days ago accounted for 9 percent of company revenues in the last fiscal year, for a total contribution of USD 94.4 mil (Ksh 7.56 bil). M-PESA revenues grew 158% over last year’s figure of USD 36.6 bil (Ksh 2.93 bil).
M-PESA as percentage of Safaricom's data revenue. ©CGAP analysis
It’s not just the gross revenue amount that is surprising. Two more things caught my eye.
First, Safaricom is lauding 78% growth in data revenue as the main engine behind the overall 37 percent growth in company profits (to USD 261.9 mil). And M-PESA now accounts for 48% of all data revenues, and 70% of the total growth in data revenue last year. In other words, this year M-PESA was the single biggest driver of new profits for Safaricom. Goodbye SMS as the #2 revenue source, at least for this mobile network operator.
Second, M-PESA may be delivering even more to the bottom line. A little guesswork is involved. The service is 3+ years old. Safaricom still incurs variable costs of agent commissions, marketing, HQ staff. But if they’ve paid off the original large, lumpy front-end investments in the M-PESA platform, the huge initial marketing blitz and no doubt a few high-priced lawyers to help sort out regulatory treatment… well, it would not surprise me if a substantial portion of M-PESA revenues now flows directly through to profits. Let’s say it’s half; in other words, USD 47.2 mil in profits from M-PESA. And we know Safaricom’s overall profits for 2010 were USD 261.9 mil. In this scenario M-PESA is generating 18% of all Safaricom profits.
Not bad. Not bad at all.
-Mark Pickens
4 Comments
June 7th, 2010 at 7:36 am, jiten patel ()
Actions do speak louder than mere words, and M-Pesa makes a compelling statement. M-Pesa is a creature of a perfect storm, i.e. where a MNO was given an upper hand in offering such services without any involvement or interference from mainstream banks; something we may not likely see being allowed elsewhere.
The numbers show that with a combination of market share, agent network, and a good product it can be profitable.
For the future, M-Pesa with their recent link-up with Equity Bank to offer savings products is ratcheting up the pressure on banks and MFIs alike, however they would be well-served to make infrastructure improvements in their service reliability, and they offer the potential for increasing the heat on the likes of MoneyGram and Western Union for money transfer business in Africa.
June 8th, 2010 at 9:27 am, Mark ()
Jiten, I agree with most of your assessment, particularly the excitement around the Equity-Safaricom product partnership on M-Kesho.
But rather than acting as interference, bank partnerships may in fact help some operators achieve profitability, especially to drive uptake and usage where operators do not see the “perfect storm.”
June 9th, 2010 at 2:41 am, John Ngahu ()
This is an interesting analysis. It will get even more interesting when Equity’s exclusivity with Safaricom for M-Kesho ends in one years time. Looking at it from a competitive angle, the M-kesho service should be available amongst various banks then the platform for competition amongst banks may shift to focus on low cost savings and credit accounts entirely dreliverd on a mobile platform. With the licensing of agent banking in kenya, MPESA agents could well have their strategic plans mapped out for them.
July 12th, 2010 at 11:53 am, VC4AFRICA — Blog — Ed Dodds added a blog post ()
[...] added a blog post Proof mobile money can make money? M-PESA earns serious shillings for Safaricom http://technology.cgap.org/2010/06/07/proof-mobile-money-can-make-money-m-pesa-earns-serious-shillin... You want proof mobile money can make money? Look to M-PESA, which according to Safaricom’s annual [...]
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