By Alexandra Wexler
JOHANNESBURG--Africa's biggest telecommunications companies are
striking deals allowing their customers to make payments across
networks and borders, the latest stride in the continent's ascent
as a leader in mobile financial technology.
Starting this month, London-based Vodafone Group PLC and South
Africa's MTN Group Ltd. plan to allow customers in East and Central
Africa to send each other money, the first time Africa's biggest
telecoms have cooperated in the competitive mobile payment
space.
Their new partnership could spur even more economic growth in
these fast-growing markets, and drum up revenue for mobile
companies in countries where demand for new cellphones and airtime
has matured. Fierce competition is one reason MTN lost revenue per
user in 19 of its 22 markets in the first quarter, MTN said.
"Finally, [telecoms] woke up and smelled the coffee," said Hans
Kuipers, a Johannesburg-based partner at the Boston Consulting
Group. "In order to really develop a healthy ecosystem, you have to
develop interconnectivity."
The telecoms also hope that their partnership will give them a
bigger slice of the $48 billion the World Bank estimates that
Africans sent and received as remittances during 2014.
Until now, mobile companies have resisted "interoperable"
partnerships as they raced to build their own market share. The
most successful mobile-money service is the M-Pesa system started
by Vodafone's Kenyan subsidiary Safaricom Ltd. in 2007.
Today Safaricom's 14 million M-Pesa customers pay for everything
from safari lodge stays to taxi rides via the platform.
Now some of that cash could flow to MTN, via the new partnership
that will allow payments between Vodafone subscribers in Kenya, the
Democratic Republic of the Congo and Tanzania and MTN users in
Uganda, Rwanda, South Sudan and Zambia.
One hurdle has been getting central bank approval in each market
to send and receive money from abroad, said Serigne Dioum, MTN's
head of mobile financial services. As of May, MTN had approval to
receive money in Uganda, as well as to send and receive money in
Rwanda. Vodafone declined to comment.
Mr. Dioum said MTN and Vodafone sought to pair countries where
MTN was stronger with countries where Vodafone's subsidiaries
dominate, creating broader regional reach for both companies. East
Africa, he said, "is where our mobile money offers have more
penetration and it is where mobile money is working well."
MTN and Vodafone wouldn't say how they will split profits from
the network-to-network, cross-border payments.
Mr. Dioum said the partnership will cut fees for cross-border
transfers from up to 20% of a transaction's value to 3% or less,
something MTN achieved in a pilot partnership launched with Airtel
Burkina Faso last year between Burkina Faso and neighboring Ivory
Coast.
The World Bank says reducing such fees by just five percentage
points would save Africans $16 billion a year. That's money
customers might channel toward more mobile purchases, operators
say.
"We want people to use their [mobile] wallet to perform every
single transaction, including international money transfers," Mr.
Dioum said. Last year, Ugandans sent $72 million in remittances to
Kenya, according to data from the World Bank. Kenyans sent Ugandans
$51 million.
Vodafone said it already has seen the benefits of
interoperability following a February deal for its 7 million M-Pesa
customers in Tanzania to transact with the 4 million Tanzanian
customers of rival Tigo, a subsidiary of Millicom International
Cellular SA.
"The more people playing in the ecosystem, the better it is for
everyone, " said Greg Reeve, Millicom's head of mobile financial
services. With the signing of that deal, which followed a different
agreement between Tigo and two other Tanzanian carriers last year,
Tanzania has become the most interoperable market in Africa.
Mortimer Hope, director of spectrum and public policy in Africa
for the Global System for Mobile Communications Association, said,
"In Tanzania, usage of mobile money was fairly good, but once there
was interoperability, there was a steep increase in usage."
The association, which represents the interests of mobile
operators world-wide, said many of its most innovative members are
working in Africa, and that mobile-payment methods they pioneer may
end up deployed from the U.S. to Japan.
African operators say they are only starting to tap their
homegrown potential.
"We don't really know how big it is," said Michael Joseph,
director of mobile money at Vodafone and former chief executive at
Safaricom. "This is what we're starting to capture."
Write to Alexandra Wexler at alexandra.wexler@wsj.com
Access Investor Kit for Vodafone Group Plc
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GB00BH4HKS39
Access Investor Kit for MTN Group Ltd.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US62474M1080
Access Investor Kit for Vodafone Group Plc
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US92857W3088
Access Investor Kit for MTN Group Ltd.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=ZAE000042164
Subscribe to WSJ: http://online.wsj.com?mod=djnwires