Should MTN, Airtel and M-Pesa fear the Wave effect?

By Quentin Velluet
Posted on Thursday, 21 April 2022 17:15, updated on Thursday, 28 April 2022 21:53

A customer uses the mobile money solution offered by the operator MNT, in Accra, Ghana, in April 2021. © Nipah Dennis/Bloomberg via Getty

MTN, Airtel and M-Pesa have decided to separate their mobile money business in order to attract outside investors. However, according to some experts, Wave's low-cost model could undermine its valuation targets.

So far, so good. Mobile money and digital financial services are set to become the new golden goose of operators across a continent that has 184 million active wallets and whose total transaction volume in 2021 exceeded $700bn (+39% compared to 2020), according to the latest figures published by the GSMA on the sector. But what if Wave expands its low-cost model beyond West Africa? And what if similar services are launched at the same time?

Some industry analysts such as Jean-Michel Huet, a partner at the consulting firm BearingPoint and a specialist in African tech, feel that this dynamic would have a detrimental effect on attempts to value services such as MTN MoMo and Airtel Money, which are currently trying to attract foreign investors and whose hopes are worth billions of dollars.

Record valuations

As a reminder, Ralph Mupita-led MTN MoMo has been hoping since 2021 to reach a valuation of $6bn (nearly 57 million active users) by 2023. The pan-African operator was waiting to be awarded its licence, which was validated in mid-April 2022, in Nigeria.

For its part, Airtel Money, which claimed to have 25.7 million users as of 31 December 2021 and contributes 11.6% of the group’s turnover in Africa, has already received $500m from Mastercard, Qatar Investment Authority (QIA) and TPG’s The Rise fund.

As for the operator Vodacom, which owns 50% of M-Pesa alongside Safaricom, its CEO Shameel Joosub indicated in May 2021 that he wanted to open up some of the capital to new investors in order to boost the development of this platform with more than 50 million active users. However, one of the factors that could jeopardise this momentum is the industry’s over-reliance on transaction fees and prices.

“Competition from Wave could indeed affect the valuation of mobile money players. It has already had repercussions on their turnover (in Orange’s case) and is likely to significantly affect the entire sector’s profitability because of the price war, which is melting margins,” says Sylvain Morlière, director of the unit in charge of the mobile distribution and financial services sector within the specialised consultancy firm Sofrecom.

In Senegal, Orange, via its West African subsidiary Sonatel, has already noticed this fall in value. This led to the end of 20,000 jobs, according to figures put forward by Alioune Ndiaye, Orange Africa and Middle East’s general manager.

A dependence on commission fees

As early as 2019, the GSMA, the world’s leading telecoms lobby, warned about the fragility of the mobile money business model, calling on mobile money services to adopt a platform approach: “The ‘payments as a platform’ approach will also reduce mobile money providers’ dependence on revenues from user fees. This transition will allow them to transform their revenue model and extend their value proposition to new products and adjacent revenue streams to ensure the sustainability of their business in an increasingly competitive environment,” the association said in its report.


“To secure or continue to grow their revenues in the mobile money market, should competition from Wave persist, operators providing this solution must imperatively find new sources of revenue,” adds Morlière.

According to him, the sector’s players must diversify by developing or accelerating their offer on new uses (merchant payment, credit, savings, insurance, etc.). This can be done by investing in new market segments or under-exploited segments (informal enterprises, SMEs and large companies, public sector, etc.), developing the sale of third-party services, which means becoming a platform, for example like Alipay and WeChat Pay, which offer digital services such as television, video games, the press and even the possibility of reserving transport services.

Diversifying uses

The problem is that most commercial interactions on mobile money platforms are still limited to simple money transfers between peers, while merchant payments remain the major segment to be conquered. However, this is not unique to the African continent: “79% of the total turnover of mobile money providers in June 2021 came from commissions on cash withdrawals and peer-to-peer transfers”, underlined the GSMA in the latest edition of its report dedicated to mobile money in the world.

Therefore, the industry must diversify offers and uses if it wants to avoid solely price-based competition. This shift would finally relieve the intermediaries, who are the first victims of this situation.

Understand Africa's tomorrow... today

We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.

View subscription options