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Mobile money 2.0 and telco spin-offs

get.Africa
Mobile money 2.0 and telco spin-offs
By get.Africa Weekly • Issue #71 • View online
M'mawa wabwino,
That’s “good morning” in Chichewa
Mobile money in Africa is defined by two eras.
Mobile money 1.0 was led by MNOs (mobile network operators or telcos) who leveraged their distribution networks and customer bases to dominate that era. But with smartphone and internet penetration continually on the rise, software companies are finding more opportunities to compete.
This new era is mobile money 2.0.
If you want to understand both eras in-depth, there’s a piece titled “The Fight for Mobile Money 2.0”. It was written by Wiza Jalakasi, VP of Developer Relations at Chipper Cash. It’s a long one but it’s definitely worth a read. 
The Big 4
For MNOs who’ve also become MMOs (mobile money operators), the question then becomes what strategy do you adopt in the new era - leave the MMOs inside their parent companies or cut the umbilical cord?
1. Airtel Money: Airtel Money has 19 million active users, its parent company has spun off a subsidiary called Airtel Mobile Commerce BV (AMC BV). AMC BV is currently valued at $2.65 billion.
2. MTN Mobile Money (MoMo): MoMo currently has 38 million active users, according to its president and CEO, Ralph Mupita, the business is valued at between $5 and $6 billion. MTN has plans to make MoMo a standalone business by 2022, according to Mupita:
“If we were a bank, we would be a very big bank.”
3. M-PESA: Speaking of banks, M-PESA’s parent company Safaricom has a market cap north of $14 billion, which is over 3 times more than Kenya’s commercial banks combined. The mobile money division undoubtedly makes up a huge chunk of that, but Safaricom Kenya’s CEO Peter Ndegwa insists that, despite regulatory pressure, he has no intention to split up the business. 
At the group level, though, Safaricom and M-PESA’s other parent company, Vodacom, have launched a joint venture called M-PESA Africa, which operates as a separate software/API company.
In the MMO space, M-PESA is the market leader with over 40 million active users.
4. Orange Money: Orange Africa is a private company, information on its corporate structure and valuation was hard to come by. However, Orange Money has 20 million active users.
Pros and cons
There are 2 main reasons why MNOs might choose to spin off their mobile money operations:
1. Attract more investment: Telcos are CapEx-intensive, low-to-moderate-growth businesses that are often a poor fit for venture capital. Telcos separating their CapEx-light, high-growth fintech divisions could enable those divisions to attract more investment. We’ve already seen this with AMC BV recently raising $200m.
2. Faster innovation: Telcos are notoriously slow to innovate; a telco-backed fintech competing against software-based fintech is the equivalent of two sprinters in a 100m dash with one having to run with a huge rock tied to their ankle.  
That said, perhaps the best argument against divesting — better synergy —was put forward by the Safaricom CEO.
“There are significant synergies and dependencies especially from a customer perspective. We do see a significant data, big data and analytics opportunity for us in keeping the two businesses together.”
In mobile money 2.0, the dominance of Airtel Money, MoMo, M-PESA and Orange Money will be tested. And the operators without a strategy to face that test will find the new era significantly more challenging than the first.

get.Africa is a weekly roundup of the most interesting stories in African tech. To support, follow us on Twitter, subscribe to our YouTube channel, share this issue or send us an email. You can also check our archives.
What's the Big Deal?
+UGX, GH₵ Chipper Cash, a three-year-old startup that facilitates cross-border payment across Africa, has closed a $100 million Series C round to introduce more products and grow its team. The company is currently valued between $1-2 billion thus joining the exclusive billion-dollar club.
+ OPay is also set to reach a billion-dollar valuation, the Lagos-based, China-backed payments company is in talks to raise $400 million at a valuation just north of $1.5 billion.
+ ₦ Nigerian fintech API startup, Mono, has announced a raise of $2 million in seed funding. The new investment is to enhance its operations. It is coming just 2 months after it got selected into Y Combinator and netted $125,000 in funding.
+ ZAR MTN has partnered with the International Finance Corporation (IFC) to invest $2 million in its mobile money service. The investment will be used to recruit, enrol, and train 10,000 mobile money agents.
Reads
Inside the torrid quest for that elusive first South African tech unicorn
Some myths versus realities of Africa-China tech narratives
Siri and Alexa still don’t support African languages
The high-tech ‘makeover’ of Europe’s deadly border with Africa
Social media misinformation puts Africa vaccine drives at risk
Charts + Graphs
A lot of the coverage on African tech is focused on the big 4, this newsletter is also guilty of this. This report (paywall) looks at funding in other parts of the continent. By the way, Ghana is #5, Uganda is #6, Tanzania is #7, Tunisia is #8, Morocco is #9 and Ethiopia is #10.
+ Reads
+ It’s raining digital currencies: The South African Reserve Bank (SARB) islaunching a feasibility study for a retail central bank digital currency (CBDC), Nigeria’s central bank governor is also floating the idea of a digital currency. Meanwhile, a closer look at the regulatory sandbox issued by the Reserve Bank of Zimbabwe outlines that cryptocurrencies, digital currencies, and CBDCs are not eligible.
+ Increasing the difficulty level: CBN slams $9.7m escrow and shareholder requirements on Nigerian fintech companies.
+ Nigeria’s Ponzi plague: Brisk Capital promised its investors 30% monthly returns, then it started to default. This article (paywall) explains how Nigeria’s celebrities are complicit in popularizing companies like Brisk. Thankfully, SEC’s new guidelines requiring online investment platforms to register by June 30 should come to the aid of investors willing to do their due diligence before investing.
+ No more adult content? A new amendment to the cybercrime act in Kenya seeks to block certain websites, including adult content.
+ Mixed news and second chances: Shares in Safaricom surged after the consortium it led won an Ethiopian telecoms license, but with US sanctions looming, that optimism might be short-lived. Meanwhile, MTN may receive Ethiopia’s second telecoms licence only a few months after losing out on the first.
Watch + Listen
What is an NFT?
What is an NFT?
Uganda: Are mobile wallets in East Africa the way to a 'crypto' future?
How significant is the opportunity for tech companies in Africa?
Interview with Hanu Agbodje, the Founder and CEO of Patricia
Overheard on Twitter
Wiza Jalakasi 🇲🇼
This is the next big thing, interoperability. It's so difficult now because players don't trust each other and require each other to hold a float balance within their various wallets. If we can transcend that model and work at the protocol layer instead, very huge. USDC maybe. https://t.co/1iTb3gf3Gi
Classifieds
I'm writing a book on remote work for African businesses
I'm writing a book on remote work for African businesses
+ To make whiteboard animation videos like this for educational or marketing purposes, please send us an email.
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