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.”
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.