Vodafone-Idea to close m-pesa biz, writes off ₹210 cr for payments bank closure

Vodafone Idea Ltd has decided to close m-pesa vertical following the closure of Aditya Birla Idea Payments Bank Ltd (ABIPBL), in which it was being merged with, a top official said on Monday. Launched in 2007, M-Pesa is a mobile phone-based money transfer, financing and microfinancing service launched by Vodafone for Safaricom and Vodacom.

Nearly 17 months after it began operations, ABIPBL on 20 July announced winding up of its business on account of “unanticipated developments” that made its economic model “unviable”.

“The merger of Vodafone m-pesa with ABIPBL has thus been called off and business prepaid instruments and business correspondence are in the process of closure,” Vodafone Idea Chief Executive Officer Balesh Sharma said company’s earning call.

He attributed regulatory changes for the payments bank business and deterioration in the health of the telecom sector to the decision.

“Now, that we are proposing not to have the payments bank as well as them-pesa business. Instead of having m-pesa of our own, we will explore the market and partner with fintech companies,” Sharma said.

Vodafone Idea wrote off 210 crore in the June quarter on account of the decision to close its payments bank business.

“The impairment charges include impairment in payments bank and m-pesa entities of 2.1 billion ( 210 crore) following the decision to discontinue payments bank, wallet, and business correspondent businesses in the respective entities,” Vodafone Idea Chief Financial Officer Akshaya Moondra said.

The company had written off a total amount of 580 crore during the first quarter of 2019-20.

Vodafone m-pesa was one of the 11 firms that were given payments bank license by the Reserve Bank of India in 2015.

Tech Mahindra, Cholamandalam Investment and Finance Company and a consortium of Dilip Shanghvi, IDFC Bank Ltd and Telenor Financial Services surrendered their payments banks’ licenses even before commencing their business.

Sharma said that the decision to close down payments bank business is also part of the company’s strategy to focus on core business which is the telecom business.

Vodafone Idea is phasing out 3G services and re-farming all spectrum for 4G services.

The company is looking to check the churn of customers onto another network which led it to lose market leadership position to Reliance Jio in June.

Reliance Jio had a user base of 331.3 million by June 2019 while that of Vodafone Idea subscriber base declined to 320 million in the same month.

Sharma said after a minimum charge of 35 per month introduced by the company, many customers consolidated to a single SIM which showed 4G subscribers moving out of the Vodafone Idea network.

He said the churn has come down to 3.7 percent and the company is making an effort to curb it further with high revenue-generating customers.

The company is looking to check the churn of customers onto another network which led it to lose market leadership position to Reliance Jio in June.

Reliance Jio had a user base of 331.3 million by June 2019 while that of Vodafone Idea subscriber base declined to 320 million in the same month.

Sharma said after a minimum charge of Rs 35 per month introduced by the company, many customers consolidated to a single SIM which showed 4G subscribers moving out of the Vodafone Idea network.

He said the churn has come down to 3.7 percent and the company is making an effort to curb it further with high revenue-generating customers.

A few days back, a report from economists at SBI said that “The future is “uncertain” for payments banks and the model aimed at deepening financial inclusion requires regulatory support in order to be effective.”

Subscribe to our YouTube Channel for more entrepreneurship, business, corporate solution videos and Like Facebook Page 

StartupColleges Team

StartupColleges is associate degree info platform for entrepreneurs, startups, entrepreneurship, technology enthusiast, and company. we have a tendency to aim to empower entrepreneurs with the information to create a positive impact in overall school –driven startup scheme. Our objective is to make a dynamic and Impact setting which will facilitate to foster property and thriving entrepreneurship scheme on India.

Leave a Reply

Your email address will not be published. Required fields are marked *