Safaricom’s CEO Collymore stays, as parent Vodafone restructures holding
Bob Collymore will stay on as Safaricom Chief Executive for another year, with his contract now set to expire in August 2020.
This latest extension gives him time to complete several things, including finding new revenue streams for the Kenyan telecoms giant.
- Collymore’s tenure was set to end this August, and the search for his successor has already pitted the two largest shareholders – Vodacom and the Kenya Government – against each other.
“I had like nine months off last year and so I think we all just agreed that I owe the company another year,” Collymore told Reuters.
He said that he will also use the time to diversify revenue streams as “voice is flat, it is headed to its decline, data (showed) disappointing growth last year.”
- He also announced that Safaricom is working on a joint venture with Vodacom Group to acquire the MPESA brand from Vodafone. The deal, when finalized, will cost the two companies $13.4 million.
- According to Collymore, acquiring the rights to MPESA will allow the partners to expand the platform’s footprint in Africa and develop more local products.
“We are watching Ethiopia closely because as we see the liberalization of the markets, both the mobile payments market, the telecoms market and the banking sector, we think there could be opportunities,” Collymore said.
- Speaking to The Africa Report in February, Collymore had said a successor should be, “Someone who understands the financial sector a lot more, if we are to occupy the fintech space, and someone who is not going to be scared of going into other markets.”
Vodacom Group also announced the acquisition when releasing its latest financial results two weeks ago.
The South African company acquired a 35% stake in Safaricom in May 2017, after a share swap with their common parent company, Vodafone.
In the deal, Vodafone transferred part of its indirect shareholding to Vodacom, retaining a 5% stake in Safaricom. It increased its shareholding in Vodacom from 65.0 percent to 69.7 percent.
Subsequent restructuring in South Africa reduced Vodafone’s shareholding to approximately 60.5 percent.
- The extensive restructuring is part of Vodafone’s efforts to make Vodacom Group its exclusive investment vehicle in Sub-Saharan Africa. A previous deal, signed in 2008, had excluded the Kenyan and Ghanaian markets where Vodafone already had subsidiaries.
Acquiring the rights to the brand will help both companies retain the revenue shares they currently pay Vodafone, and also open up new revenue streams. Safaricom currently pays 2 percent of its annual M-PESA revenue to Vodafone, while Vodacom pays 5 percent.
- Vodacom’s financial statements for the year ended 31st March 2019 showed that Safaricom contributed R.2.8 billion net profit. Vodacom Group now has 110 million customers, with 22 million of them in Safaricom, for its financial services across the group.
- “In South Africa, our profit before tax from Financial Services doubled to R1.0 billion, while M-Pesa revenue grew by 32.2% to R3.1 billion in our International operations and now makes up one-sixth (15.8%) of that portfolio’s entire service revenues” the company said in its statements.
In previous reports about the plan to enter the Ethiopian market, Safaricom would have provided back-end support and the technology, while Vodafone would license the MPESA brand to a bank, with Ethio Telecom carrying the service.
Bottom line: A joint venture by Safaricom and Vodacom gives them more wiggle room to make such decisions, as well as a greater share of future revenues.