MICROCAPITAL BRIEF: Vodacom to Discontinue M-Pesa Mobile Money Service in South Africa

Vodacom Group Limited (Vodacom), a South African subsidiary of UK-based Vodafone Plc, recently announced it will discontinue its mobile money service, M-Pesa, in South Africa as of June 30, 2016. M-Pesa, launched by Vodafone Plc in 2007, allows customers to send and receive money from their mobile phones using short message service (SMS) text messages. The service will continue to operate in other countries, for example Democratic Republic of Congo, Kenya (where M-Pesa is the most popular), Lesotho, Mozambique and Tanzania, where approximately 25 million people use the service. The service also operates in other countries outside of Africa, for example India, Fiji and Romania.

Shameel Joosub, the CEO of Vodacom, indicated that “Vodacom’s decision is based on the fact that the business sustainability of M-Pesa is predicated on achieving a critical mass of users. Based on our revised projections and high levels of financial inclusion in South Africa there is little prospect of the M-Pesa product achieving this in its current format in the mid-term”.

For the financial year that ended March 31, 2016, Vodacom reported total assets of ZAR 78.5 billion (approximately USD 5 billion), net profit of ZAR 12.9 billion (approximately USD 800 million), return on assets of 18 percent and return on equity of 58 percent. Vodafone Plc reported a loss of GBP 3.8 billion (approximately USD 6 billion), total assets of GBP 123 billion (approximately USD 178 billion), return on assets of -1 percent and return on equity of -2 percent for the financial year that ended March 31, 2016.

By Imke Herholdt, Research Associate

About Vodacom Group Limited (Vodacom)
Vodacom, headquartered in Johannesburg, South Africa, is majority-owned by Vodafone Plc, a mobile communications company based in the UK. Vodacom provides communication services including mobile voice, messaging and data to approximately 61 million customers in Africa. For the financial year ended March 31, 2016, Vodacom reported total assets of ZAR 78.5 billion (approximately USD 5 billion), net profit of ZAR 12.9 billion (approximately USD 800 million), return on assets of 18 percent and return on equity of 58 percent. Vodafone Plc reported a loss of GBP 3.8 billion (approximately USD 6 billion), total assets of GBP 123 billion (approximately USD 178 billion), return on assets of -1 percent and return on equity of -2 percent for the same year.

Sources and Additional Resources
[1] Reuters: Vodacom pulls plug on mobile money service M-Pesa in South Africa
[2] Tech Financials: Vodacom abruptly pulls plug on M-Pesa in South Africa
[3] Vodacom
[4] FT.com: Vodacom Group Ltd
[5] MicroCapital Universe Profile: Vodacom
[6] MicroCapital Universe Profile: Vodafone Group
[7] FT.com: Vodafone Group Plc
[8] MicroCapital Universe Profile: M-Pesa

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