A Financial Analysis of Mobile Money Services

Abstract

With limited reporting by mobile network operators ("MNOs") on the financial performance of mobile money businesses, the paper develops a financial reporting framework to indentify (and quantify) operating costs associated with delivering mobile financial services to unbanked populations in emerging markets. The framework is based on a review of relevant literature and an analysis of the financial reporting of conventional money transfer businesses. Using the mobile money framework and monthly mobile money customer/agent data reported by Safaricom Kenya, we developed a test-case model of the historical performance of M-PESA since its launch in 2Q07. The test case synthesizes the evolution of M-PESA's revenues, operating costs, and cash flow as a separate business-reporting unit within Safaricom. The analysis indicates that even M-PESA Kenya, widely regarded as one of the most successful MMS deployments worldwide, did not actually breakeven until nearly two years of operation. Based on the analysis, the broader (mixed) impact of mobile money services on a MNO's consolidated operating margins, working capital, and cash flow generation are extrapolated.