NAIROBI (Reuters) – Kenya has ordered telecoms firm Safaricom to stop processing payments for sports betting companies, potentially shutting down a lucrative source of revenue for the company.

Online sports betting companies such as SportPesa have grown rapidly in the East African nation in recent years, riding a wave of enthusiasm for sports to achieve combined revenue of 204 billion shillings ($2 billion) last year.

However, that has sparked concern in the government about the social impact of betting. In May, the country introduced new gambling regulations, including banning advertising outdoors and on social media.

The gaming companies rely on Safaricom’s market leading network to take bets, communicate with users and process payments on the company’s popular M-Pesa mobile cash platform.

Each betting firm is assigned a unique number, known as a pay-bill, which is used to process payments from users who place bets on their mobile phones and to pay off those who win.

Customers using basic feature phones rely on short codes assigned to each betting company.

Liti Wambua, the acting director of the regulator Betting Control and Licensing Board (BCLB), told Safaricom in a letter seen by Reuters on Thursday that licences for all 27 betting firms had not been renewed, pending the outcome of an ongoing inquiry about their suitability to operate in the country.

“Consequently, we request you to suspend their pay-bills and short codes until otherwise advised,” Wambua said in the letter.

In a response, through its lawyers, Safaricom said it required time to carry out the order since abrupt implementation would result in shutting millions of users out of funds already deposited in the gaming wallets of the various betting firms.

“The directive by the board will impact over 12 million customers,” Safaricom said.

It added that two of the gaming companies had also obtained court orders allowing them to continue their operations without a renewed licence, further complicating the situation.

Safaricom executives have told Reuters in the past that the betting industry, through text messages and M-Pesa, has become a significant part of its revenue in recent years.

The betting firms defend their activities.

“SportPesa is a law-abiding corporate citizen that upholds all tax and regulatory requirements,” said SportPesa, one of the biggest online betting and gaming companies.

($1 = 102.8500 Kenyan shillings)

Reporting by Duncan Miriri and Humphrey Malalo; Writing by Duncan Miriri; Editing by Mark Potter