Safaricom market share surpasses 80% as rivals look to emulate M-PESA success
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Kenya’s leading mobile operator Safaricom has seen its market share surpass 80 percent, according to the latest Wireless Intelligence data. The operator’s strong performance is being driven by its pioneering M-PESA mobile money transfer service, which is reportedly now being used by more than 20 percent of the Kenyan population.
Safaricom – which is 40 percent-owned by UK-based Vodafone – strengthened is market leadership in Q3 2009 by adding 600,000 new additions to reach 14.5 million connections in total (see table). Its growth was in stark contrast to second-placed Zain Kenya, which continued to lose customers in the quarter and saw its connections base drop 14 percent year-on-year (Zain attributed this churn to ‘recurring clean-up exercises’ in its customer base). Among the smaller operators, Orange Kenya and Essar Telecom’s yu – both of which launched in 2008 – are now taking a significant share of net additions but jointly account for less than 10 percent of total connections in the country.
Launched in 2003, Safaricom’s M-PESA allows mobile-based person-to-person remittances, bill payment, airtime top-up, ATM withdrawal and mobile wallet services. According to World Bank data, only 10 percent of the Kenyan population have access to traditional banking services, compared to a mobile penetration rate of 53 percent (in Q3 2009). As a consequence M-PESA is used as a primary means of banking by many Kenyans.
Safaricom claims that M-PESA had just under 8 million registered users in Q3 2009, almost double the number a year earlier, while the number of agent locations has grown from 4,230 to 13,326 over the same period. The value of person-to-person transactions via M-PESA reached KSH22.65 billion (US$302 million) in September 2009, up from less than KSH10 billion a year earlier. The service has also played a key role in driving Safaricom’s non-voice revenue, which increased by 93.6 percent to KSH7.20 billion in the six months to Q3 2009. Non-voice revenue now represents 18 percent of total revenue, driven by the combined growth of both mobile broadband services and M-PESA. Safaricom is the only operator to have rolled out 3G in the country to date, having switched on its WCDMA and HSPA networks in 2008 (its HSPA network at 7.2Mb/s is one of only six in Africa). Rival operators – many of which have complained at the high cost of acquiring 3G spectrum – are scheduled to switch on their first commercial WCDMA networks later this year.
M-PESA was launched by Vodafone’s Tanzania subsidiary, Vodacom, in July last year, and it is reportedly being considered for rollout by other Vodafone-affiliated operators in India (Vodafone Essar), Egypt (Vodafone Egypt) and South Africa (Vodacom South Africa). Meanwhile, back in Kenya, the service has also recently been extended to target the large market for international remittances dominated by the likes of Western Union; inbound remittances account for 4.9 percent of Kenya’s GDP, according to the World Bank. Safaricom trialled a UK-to-Kenya international M-PESA service last year and has plans to extend this soon to other countries that regularly remit funds into Kenya, such as the UAE and the US.
The success of M-PESA – easily the most popular mobile money service anywhere in the world – has provided the template for rival services in Kenya and across Africa. Zain launched its rival service – known as ‘Zap’ – in Kenya, Tanzania and Uganda in February 2009, and last month announced it is to also rollout the service to Niger, Sierra Leone and Malawi. Zain says that 10 million people have used the service to date, but does not break down the numbers on a country basis. The addition of the extra three African markets means that Zap will be available to a total population footprint of 150 million.
Last month also saw yu announce a partnership with payments provider Obopay and Nokia to launch yuCash, another M-PESA rival in Kenya. Based on the Obopay platform, yuCash is being rolled out early this year. Orange Kenya is expected to announce details of its own service soon.
Figures from the Central Bank of Kenya published this month found that Safaricom and Zain jointly transferred KSH318.4 billion through their respective mobile money transfer services in the year to June 2008, which translates to around KSH1 billion per day. This represented a 421 percent growth over the KSH61.1 billion transferred in the year earlier period.
Will Croft, Analyst, Wireless Intelligence:
Given the improvements seen in subscribers, revenue and churn at Safaricom since the launch of the service, Kenya’s M-PESA deserves to be heralded as a mobile money success story in the developing world; rivalled perhaps only by the GCash and SMART Money deployments in the Philippines. Usage of the service corresponds to 57 percent of Safaricom’s customer base and - according to the Cental Bank of Kenya - an estimated 21 percent of the entire population, including 40 percent of adults. Services such as airtime top-up over M-PESA are showing significant traction in driving usage and revenues. Moreover, the effects of the service within the broader mobile eco-system in Kenya are tangible; since the launch of the bill payment service on the platform, some 75 companies are now using M-PESA to collect payments from their customers, the largest of which is the electricity company, KPLC, which has roughly 20 percent of its 1 million customers paying via the service. M-PESA is a good case-study for operators – in both developed and developing nations – that need to offset declines in traditional voice revenue; it is also a good example of how to retain customers in the prepaid, cash-driven economies, which are commonplace in Africa and elsewhere in the developing world. Upcoming deployments to watch include pan-African operator MTN, which last year announced a large-scale rollout across multiple markets and is seeing early signs of success in Uganda.