Kenya’s largest telecommunications company, Safaricom, may soon be split into three distinct business units, following a government proposal aimed at reducing the company’s market dominance and improving regulatory oversight. The proposal, which is under consideration by the Kenyan government, seeks to separate Safaricom’s core telecommunications services, its tower operations, and its highly lucrative M-Pesa mobile money service.
Why is the Kenyan Government Considering the Split?
The government’s interest in splitting Safaricom into three units stems from growing concerns about the company’s dominant position in the Kenyan telecommunications and mobile money markets. Safaricom, which is currently 35% government-owned, has long faced pressure from regulators and lawmakers to diversify its operations to ensure fair competition.
Treasury Cabinet Secretary, John Mbadi, highlighted that an assessment had shown “a huge benefit” from dividing Safaricom into separate entities. By separating the company’s telecommunications services, tower operations, and mobile money divisions, the government believes it can create a more competitive landscape for other players like Airtel and Telkom Kenya.
Safaricom’s Stance on the Split
Safaricom has consistently resisted calls for a split, arguing that separating its mobile money business would offer no additional value to its shareholders. The company’s CEO, Peter Ndegwa, reiterated in May 2024 that Safaricom does not intend to follow the path taken by Airtel Kenya, which separated its mobile money business into Airtel Money Kenya Ltd (AMKL) in 2022.
According to Ndegwa, the integration of M-Pesa with Safaricom’s telecommunications services gives the company a strategic advantage, and there’s no compelling reason to create separate entities unless it directly benefits the company’s customers or shareholders. He added that M-Pesa is already regulated by the Central Bank of Kenya (CBK), while the telecommunications services are regulated by the Communications Authority of Kenya (CAK), and both regulators carry out their oversight duties effectively.
A Timeline for the Split: What Could Change?
In early 2021, Kenyan lawmakers attempted to push through legislation aimed at splitting Safaricom’s business. However, the debate over the Kenya Information and Communications (Amendment) Bill failed to gain traction. Despite this setback, the issue was revived in 2024, when lawmakers reignited the conversation, emphasizing the need for increased scrutiny of Safaricom’s operations.
In response to the pressure, Safaricom announced plans to create a holding company (Holdco) in 2025. Under this new structure, Safaricom will have its M-Pesa, data, voice, and messaging divisions operate as separate subsidiaries. However, as Ndegwa pointed out, M-Pesa will remain a key subsidiary of Safaricom, rather than being spun off into an independent entity.
What Could the Split Mean for the Kenyan Market?
If the government proceeds with the proposal to split Safaricom, it could lead to several changes in the Kenyan telecommunications market:
1. Increased Competition
The separation of Safaricom’s telecom, tower, and mobile money services would give other telecom operators, particularly Airtel and Telkom Kenya, a more level playing field, enabling them to compete more effectively with Safaricom.
2. Better Oversight
The split would enable more focused regulatory oversight of Safaricom’s individual business units, particularly its mobile money service, which has grown to account for nearly half of Safaricom’s revenue.
3. Greater Transparency
By having separate entities, Safaricom’s operations in the telecom and mobile money sectors would likely be subject to more transparent financial reporting and governance, providing clearer insights into the performance of each division.
4. Improved Value for Shareholders
If structured properly, the separation could unlock greater value for shareholders, as the different entities may have more focused business models, making it easier to attract investors and raise capital.
The Case of Airtel and MTN
Airtel and MTN, two of Safaricom’s competitors, have already taken steps to separate their mobile money services from their telecom operations. Airtel’s process began in 2019 and concluded with the creation of Airtel Money Kenya Ltd in 2022. The separation was in response to Central Bank of Kenya’s (CBK) call for a more customer-centric approach in the sector.
MTN also underwent a similar process in other markets, a move that has allowed these companies to potentially raise more capital and improve operational efficiency.
However, Safaricom has remained steadfast in its decision to keep M-Pesa integrated within the larger organization. The company’s leadership believes this integration allows Safaricom to maintain its market advantage.
The Road Ahead for Safaricom
Despite the calls for a split, Safaricom remains one of Kenya’s most successful and influential companies. With M-Pesa driving substantial revenue growth and a broad telecommunications network, the company’s future could remain firmly in its current structure or evolve into a more complex holding company model, as proposed for 2025.
Conclusion: What’s Next?
As the debate continues, Safaricom’s leadership is focused on providing innovative services and expanding its market share, while lawmakers and regulators seek ways to ensure fair competition in the market. The decision to split Safaricom will ultimately depend on balancing the interests of the government, regulators, Safaricom, and the millions of Kenyans who rely on the company’s services every day.
