Vodafone Romania launched mobile commerce (m-commerce) platform M-Pesa in April 2014. Romania is the first European market where Vodafone has launched M-Pesa, the most successful m-commerce platform in the world created by Kenyan operator Safaricom, in which Vodafone has a 40% share. BMI believes this improves Vodafone's long term outlook in Romania, as the country's saturated mobile market and subscribers' limited interest in 3G services mean mobile operators must look to other non-voice services in order to prevent ARPU and revenue erosion.
|Romania Mobile, 3G/4G And ARPU Forecasts, 2011-2018|
The head of Vodafone Romania M-Payments, the entity that handles the mobile operator's intermediary financial transactions, expects money transfers to account for the majority of transactions, with bill payments, top-ups and payments to merchants making up the rest. Vodafone expects to attract 300,000 active subscribers to its m-commerce platform within the first year. We believe this is a realistic goal, owing to Romania's fairly high rural population of 47% in 2013, according to BMI data, and the World Bank's estimate that only 44.6% of adults had an account at a formal banking institution in 2012. These figures suggest that there is a considerable market for m-commerce services in areas out of reach of high street bank branches and ATMs.
Safaricom's dominant position in Kenya's mobile market has been integral to the success of M-Pesa, as it ensures that subscribers can reach most other people over one platform. Although Vodafone is the second ranking operator in Romania, with around 8.3mn subscriptions and a share of 30.1% at the end of 2013, BMI believes its experience with M-Pesa in Kenya, first mover advantage and much wider range of transaction values will increase its appeal compared to leading operator Orange's m-commerce service, which is scheduled to launch in H214. M-Pesa will allow users to transfer anywhere from RON1 (USD0.31) to RON30,000 (USD9,258.06) a day, while Orange Money will only allow users to transfer between RON10 and RON300.
Given the low transfer values offered over M-Pesa, BMI expects the service will generate fairly low revenues and have a minimal impact on end ARPUs. However, it will enrich Vodafone's service offerings significantly and should have a positive impact on customer loyalty. Meanwhile, if successful, Vodafone will be able to use its experience in Romania to expand M-Pesa to its other European markets, including Czech Republic, Turkey, Greece and Hungary.
Over the longer term, BMI believes expansion of the service to facilitate international remittance payments or offer savings and microloan services, similar to Safaricom's M-Shwari (See 'Safaricom Strategy Paying Off', May 15 2013), could add considerable value to M-Pesa in Europe. According to World Bank data, Italy and Spain, where Vodafone also operates, accounted for almost 60% of total remittance inflows in Romania in 2011, and in 2012 only 8.7% of Romanian adults saved and 8.4% borrowed money from a formal financial institution.