Kenya's Safaricom in 'advanced talks' to take M-Pesa to Ethiopia

ADDIS ABABA (Reuters) - Kenya's Safaricom is in "advanced talks" with the Ethiopian government to introduce its popular M-Pesa mobile money service, a major step towards establishing a toe-hold in the market of 100 million people, two sources said on Tuesday.

Britain's Vodafone, Safaricom's ultimate parent company, will license the use of the M-Pesa trade name to an Ethiopia-based bank while Safaricom will host the servers in Nairobi, one Kenyan telecoms industry source told Reuters.

Ethiopia's state telecommunications monopoly, Ethio Telecom, will carry the service, the source added.

Started in 2007, M-Pesa has nearly 30 million users in Kenya and has become the principal driver of profit growth for the dominant telecoms provider in East Africa as revenues from traditional voice and data services have flattened off.

M-Pesa's move also suggests Kenyan businesses, from telecoms to banking to farming, are well-placed to take advantage of the wave of political and economic liberalisation unleashed in the last three months by new Prime Minister Abiy Ahmed.

Nairobi-based firms have had their eye on Ethiopia for years due to its huge population and lack of economic development. However, until Abiy's arrival this year, Addis has kept foreign involvement in the economy at arms' length.

The head of Kenya's biggest bank by assets, KCB Group, told Reuters last week the lender could seek a partner in Addis after Abiy announced his intention to liberalise key parts of the economy.

Ethiopia's banking sector is currently state-controlled and dominated by Commercial Bank of Ethiopia, which holds around of 70 percent of assets in the sector, according to analyst estimates.

Safaricom declined to comment.

(Reporting by Maggie Fick and Duncan Miriri; Editing by Ed Cropley)