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Corporate

Safaricom hires consultant to advise on anticipated market dominance ruling

Telecoms operator Safaricom is carrying out an independent study on its position and activities in the market with an eye on assessing its role as a dominant player.

In an interview on Friday, Safaricom chief executive Bob Collymore said that the company had engaged a foreign company to carry out the study.

“We are taking an independent assessment of our behaviour, and our operation, segment by segment,” said Mr Collymore.

Over the last few years, a battle has raged in Kenya’s telecommunications sector with Safaricom’s rivals demanding that the company be declared dominant.

Due to its position and its size in the market, it has been argued, the company is in a position to take actions that are detrimental for competition.

Being declared dominant would mean that Safaricom would operate under stricter rules and would have its business decisions monitored closely by regulators.

The study will be parallel to one that is already being carried out by the Communications Authority of Kenya (CA).

The CA ordered the study last year amid industry pressure.  Airtel had written to the government and lobbied the Senate to have Safaricom declared a dominant player. In addition, the company demanded that Safaricom be made to divide its business into smaller parts.

Apart from Safaricom, the other players in the telecommunications industry have not performed well in the past. Last year, Airtel said that it had reported losses for half a decade. In 2014, Essar Telecom exited the Kenyan market in the wake of poor performance.

Statistics
The CA even went so far as to draft regulations indicating that all companies with over 50 per cent market share in broadcasting and telecommunications were automatically dominant players. The CA statistics indicated that Safaricom had a 65.2 per cent market share. 
However, a struggle ensued as the Competition Authority questioned the logic of the CA-authored regulations, saying that the focus ought to be on abuse of dominance rather than the status of being dominant. Eventually, the Communication Authority capitulated and ordered the study.
Safaricom has typically responded to allegations of abuse of market dominance by arguing that it ought not to be punished for its innovations and investments.

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