Money transfer: the next battleground for Uganda telcos

By Edris Kisambira October 30, 2008

Mobile money transfer services will be the next battle ground for Uganda’s mobile telephone operators with plans to launch the service by two of the four operators at different stages of development.
While MTN Uganda has kept its plan to go into money transfer under wraps, Zain Uganda has come out with it.
Yesse Oenga, Zain Uganda’s country manager said the company plans a service that will see its customers send and receive money over its ‘one network.’
Zain’s ‘one network’, which was first launched in East Africa to initially cover Uganda, Kenya and Tanzania, has since expanded to cover 22 countries in Africa and the Middle East.
A top official at MTN has confirmed the company is looking to introduce a money transfer service but did not go into details.
For Zain, the company looks at money transfer as one of many arenas for growth.
In Kenya, Zain has abandoned an e-cash product the firm had launched onto the market to counter Safaricom’s M-Pesa, but has abandoned that one for the new service, which it reckons it will be superior because it will be available to users in the three neighbouring countries of Uganda, Kenya and Tanzania.
The e-cash service is looked at as a centre-piece of Zain’s target of becoming one of the top 10 mobile phone companies with a combined subscriber base of 110 million with a EBITDA (earnings before interest, taxes, depreciation and armotisation) of $6 billion.

The innovation means that a chunk of Zain’s two million subscribers in Uganda will be able to send and receive money beyond the limited baking facilities in the country.
It will also open another competition front against money transfer firms that handle remittances from Ugandan who live and work abroad.
Experts predict that immigrant labour will continue to grow substantially, with global remittances set to reach $700 billion by 2012.
Uganda currently has a steadily growing immigrant labour force in countries in the Middle East (Zain’s one network is operational in most of them) in Saudi Arabia, Kuwait and Iraq.
At least 3,000 Ugandans work in Iraq, while numbers in Kuwait and Saudi Arabia and the United Emirates are on the rise.
The cost of remittances by mobile technology (e-cash) is said to be much lower because it removes the need for physical points of presence.


There are many new arenas for growth. We want to go into money transfer on the One Network. We also want to go into the growing data segment as well as cable TV.
All these are arenas that we are going into because our strategy is based on innovation and product development. This strategy looks at how to get to our target by 2011.


Zain Uganda country manager Yesse Oenga said money transfer is one of the innovations that the group is set to launch as it seeks to reach its target to become one of the top 10 global telecom brands with a $6 billion EBITDA (earning before interest, taxes, depreciation and amortisation) rating by 2011 and a 110 million strong subscriber base, up from the current $1.3billion and 50.7 million subscribers respectively.
Oenga said Zain would achieve this following the group’s daring move to re-brand and merge its Africa and Middle East operations under the Zain brand in August.
The group was formerly made of the Kuwait based MTC and its pan African mobile phone subsidiary, Celtel.

Safaricom’s M-Pesa
The ping of a text message has never sounded so sweet. In what is being touted as a world first, Kenya's biggest mobile operator is allowing subscribers to send cash to other phone users by SMS.
Known as M-Pesa, or mobile money, the service is expected to revolutionise banking in a country where more than 80% of people are excluded from the formal financial sector.
Apart from transferring cash - a service much in demand among urban Kenyans supporting relatives in rural areas - customers of the Safaricom network will be able to keep up to 50,000 shillings (£370) in a "virtual account" on their handsets.
Developed by Vodafone, which holds a 35% share in Safaricom, M-Pesa was formally launched in Kenya two weeks ago.
More than 10,000 people have signed up for the service, with around 8m shillings transferred so far, mostly in tiny denominations.
Safaricom's executives are confident that growth will be strong in Kenya, and later across Africa.
"We are effectively giving people ATM cards without them ever having to open a real bank account," said Michael Joseph, chief executive of Safaricom, who called the money transfer concept the "next big thing" in mobile telephony.
M-Pesa's is simple.
There is no need for a new handset or SIM card. To send money you hand over the cash to a registered agent - typically a retailer - who credits your virtual account.
You then send between 100 shillings (74p) and 35,000 shillings (£259) via text message to the desired recipient - even someone on a different mobile network - who cashes it at an agent by entering a secret code and showing ID.
A commission of up to 170 shillings (£1.25) is paid by the recipient but it compares favourably with fees levied by the major banks, whose services are too expensive for most of the population.
Mobile phone growth in Kenya, as in most of Africa, has been remarkable, even among the rural poor.
In June 1999 Kenya had 15,000 mobile subscribers. Today it has nearly 8 million out of a population of 35 million, and the two operators' networks are as extensive as the access to banks is limited.
Safaricom says it is not so much competing with financial services companies as filling a void.