Vodafone quits Facebook’s Libra project to focus on Mpesa


Britain’s multinational telecom operator Vodafone last week pulled out of the Facebook-led Libra cryptocurrency project, becoming the eighth corporation to do so among the project’s original partners.
Vodafone now intends to redirect the resources it had earmarked for Libra to further develop and Mpesa, the mobile finance platform operated by Safaricom (SCOM). Vodafone hold a stake of 5.0% in Safaricom. Additionally, Vodafone owns Mpesa intellectual property rights, which entitles it to 2.0% share of Safaricom’s Mpesa revenue.

Vodafone’s decision to channel Libra funds to Mpesa comes as Safaricom and Vodacom have explored teaming up to purchase Mpesa rights from Vodafone.

PayPal, the first corporation to leave Facebook’s Libra project, has a partnership with Safaricom built around Mpesa. Like Vodafone, PayPal also said it withdrew from Libra to focus on its own product roadmap.

Increasing financial inclusivity

Facebook unveiled Libra in June last year. It plans to develop it into a global digital currency that would speed up and lower the cost of everyday money transactions. Facebook also hopes Libra will help increase global financial inclusivity. The World Bank estimates that 1.7 billion adults around the world lack access to basic financial services like a bank account. That means that a large swath of the global population is locked out of benefits such as access to bank loans to grow their businesses.

Although Libra promises to boost financial inclusivity, it has run into strong regulatory headwinds. Financial regulators from America to Europe have raised concerns that Libra could be a risk to the stability of the global financial system. Libra’s struggle to win regulatory support is thought to be behind the decisions by Vodafone and PayPal to distance themselves from the project and return to their own roadmaps like Mpesa.

Safaricom derives one-third of all its service revenue from Mpesa

Mpesa, which Vodafone now wants to give priority, enables people to send and receive money as well as pay bills and access loans all on their handset. There were 23.6 million monthly active Mpesa users in Kenya at the end of September 2019. The service generated Ksh42 billion in revenue for Safaricom in the six months through September 2019, thereby contributing 33.8% of total service revenue. Mpesa revenue hit Ksh75 billion in Safaricom’s fiscal year ending March 2019. It contributed 31.2% of Safaricom’s service revenue in that year.

Safaricom shares fell 0.79% on Friday to close the week at Ksh31.30. Safaricom has started 2020 on a low note as the stock is down 0.64% year-to-date through last Friday.

Safaricom stock gained 41.6% in the whole of 2019, making it one of the top-five stocks that year. Sameer Africa (SMER) topped the charts with gains 85.5%. Equity Group Holdings (EQTY) and KCB Group (KCB) ranked second and third with gains of 54.4% and 45.6%, respectively. Safaricom ranked fourth and Express Ltd (XPRS) rounded out the top-five list with gains of 36.8%.

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