Industry Trend Analysis - Spin-off Costs To Weigh On MFS Viability - JAN 2018

BMI View : Tanzania, Kenya and Burundi have reportedly mandated telecom operators to offer mobile financial services (MFS) through dedicated subsidiaries. While contributing to boost trade and investments in the region, the policy will potentially impact telecoms operators' revenues and pose a risk to network investment and future value-added service creation.

The East African Community ( EAC), comprising Burundi, Kenya, Rwanda, Tanzania, Uganda and South Sudan, is working towards a monetary union by 2024. In the run-up, member states aim to harmonise monetary and fiscal policies, as well as financial and payment systems, among others. These include mobile financial services (MFS), and in Burundi, the Central Bank has announced that operators must now offer MFS through a separately managed dedicated entity or subsidiary. Seemingly, similar processes are already underway in Tanzania and Kenya and it seems likely other EAC member states will follow suit during the next few years.

Previously, we were only aware of plans for separate regulatory treatment of MFS in Kenya and had not anticipated the model being adopted elsewhere in the region. Calls for the separation of Safaricom from its successful M-PESA MFS business prompted Vodafone to sell Safaricom to its South African unit in order to minimise its exposure to increased regulation and accounting practices ( see ' Vodacom To Bolster MFS Capabilities Through Safaricom Buy ' , May 15 2017).

MFS Deeply Embedded In EAC Mobile Markets
MFS Subscribers ('000)
Source: BMI, regulators

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