From Afghanistan to Zambia, mobile network operators (MNOs) in developing countries are launching mobile money services at a rapid pace. Yet while their enthusiasm to enter this business is clear – to date 78 deployments have been launched and another 83 are being planned – their rationale for doing so is not. There’s no doubt that Safaricom’s runaway hit, M-PESA, is profitable. But Kenya represents somewhat of an anomaly – the perfect coalescence of latent demand, a dominant MNO and a progressive regulator. So the question remains for just about every MNO outside of Kenya: is there really any money in mobile money?
To answer this question, GSMA has studied our portfolio of MMU fund grantees, which includes rapidly scaling deployments like easypaisa in Pakistan, M-PESA in Tanzania and Kenya, and True Money in Thailand; interviewed mobile money practitioners; and conducted a deep-dive into the operational and financial results of MTN Uganda’s MobileMoney, a promising deployment from the East African country of 32 million where 80% of the population lacks access to financial services.

Today we’re pleased to share the first in a series of posts that will present the findings from this study. In an effort to provide a level of depth that’s useful to mobile money practitioners, we’ll focus primarily on MTN Uganda’s MobileMoney, but will be sure to put their experience in a global context where relevant. So before we answer the provocative question posed in the title of this post, first a bit of background on MTN Uganda’s MobileMoney.

Launched in partnership with Stanbic Bank in March 2009, the service enables customers to send and receive money domestically and buy airtime using their mobile phone; it’s delivered via a network of 1,400 agents; and, most importantly, it’s growing rapidly, now counting 400,000 active customers, processing as many as 385,000 P2P transfers per month, and serving as the channel through which 3% of total airtime is sold per month.

While MTN does have a full roadmap of features planned, we’ve not made any projections in our study: every insight presented is based on actual data and has been analysed using our GSMA financial model (note: a blank version can be accessed by emailing [email protected]).

So, is there really any money in mobile money? In the case of MTN Uganda’s MobileMoney, the answer is yes. The service is now cash-flow positive on a month-to-month basis – and they crossed this critical threshold just 14 months after launch. MTN’s peak financing requirement, or the amount that they had to finance before MobileMoney became cash-flow positive, was less than US$4 million. For additional details, see Exhibit 2.

For MTN Uganda, these numbers are exciting. But what’s interesting for mobile money practitioners everywhere is exactly how this service became cash-flow positive. We found that indirect benefits unique to MNOs – including savings from airtime distribution, reduction in churn, and increased share of wallet for voice and SMS – combined to account for 48% of MobileMoney’s gross profit to date. We also found that 55% of the costs in the business to date are variable and step rather than fixed; in other words, MTN’s financing requirement has been (and increasingly will be over time) driven by their own customer growth.

In the coming weeks, we’ll continue to explore the topic of profitability on this blog. We’ll take a closer look at the MTN Uganda numbers, share some practical toolkits, and address key questions relevant to mobile money practitioners, including:

• How much must an MNO invest in mobile money before turning a profit?

• How significant are airtime distribution savings to profitability?

• How significant are churn reduction benefits to profitability?

• How significant is ARPU uplift to profitability?

• How significant are direct revenues to profitability?

• How can an MNO manage costs to achieve profitability?

• How can MNOs ensure their tariff and commission models are well designed?

• What operational metrics should an MNO monitor and manage?

Part 2 How much must an mno invest in mobile money before turning a profit>>