Millicom deal with Vodacom on mobile money in Tanzania a sign of the times

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Millicom’s agreement with Vodacom to allow users of their respective mobile money services in Tanzania transmit funds to each other is part of an ongoing trend to allow interoperability among services from different networks.

The agreement, announced last week, means that four million Tigo Pesa users will for the first time be able to exchange money with Vodacom’s six million M-Pesa users in Tanzania. Tigo is Millicom’s subsidiary.

Last year, the company brokered a deal with India’s Bharti Airtel and Tanzania’s Zantel, a subsidiary of Etisalat, that allowed customers of the three operators to conduct mobile money transfers across their networks.

East Africa is recording significant growth in mobile money services mainly because of expanding usage in Tanzania and Kenya. Mobile money transfers, pioneered by Vodafone’s Kenyan unit, Safaricom, have grown more rapidly in East Africa than any other region in Africa, offering companies a way to tap a market where many people do not have bank accounts.

Tanzania is closely following Kenya in the mobile money revolution in East Africa, with slightly over 20 million mobile money users out of 27 million mobile phone subscribers, according to the Bank of Tanzania. Kenya currently has close 26 million mobile money users.

As in many other African countries, mobile money services have become a very important part of the operators’ business in Tanzania. This is largely because the voice market in Tanzania, as in other regions of Africa, is slowly becoming saturated, with operators making little profit. Stiff competition in the voice market has too been chewing into the operators’ profit margin.

Telecom research firms describe the Tanzanian telecom market as one of Africa’s most competitive, with eight mobile networks and a mobile penetration rate of 75 percent among its 48 million people.

The increase in mobile money services has also been helped by increased accessibility to mobile phones both in rural and urban areas as mobile operators continue rolling out their networks. African industry analysts expects Tigo, with a presence in seven African countries including the Democratic Republic of Congo (DRC), Senegal, Ghana and Chad to soon replicate its interoperability agreements for mobile money services in all countries where it has operations.

“We hope many more Tanzanians will choose mobile money so that everyone benefits and we can extend financial inclusion even further,” Millicom Executive Vice President for Africa Arthur Bastings said last week. “We intend to pioneer similar agreements with networks elsewhere.”

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