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Economy

Treasury’s warning renews Safaricom dominance debate

Using the M-Pesa mobile money transaction service at an agent’s shop. PHOTO | FILE
Using the M-Pesa mobile money transaction service at an agent’s shop. PHOTO | FILE 

The Treasury’s recent warning that collapse of mobile money service M-Pesa could cause widespread disruption of the economy has renewed debate as to whether Safaricom is a dominant player in Kenya’s telecoms market that requires extra regulatory action. 

The Treasury’s report classifying Safaricom’s critical role in the economy as a fiscal risk has been seen in some quarters as a precursor to the expected declaration of the telco as a dominant player, a move that will then inform regulatory policy for the company.

Safaricom rivals Airtel and Telkom Kenya have over the years accused the market leader of occupying a dominant position that has tilted the playing field in its favour.

Preliminary findings on market dominance survey commissioned by the Communications Authority of Kenya (CA) are expected to be released soon, paving the way for far-reaching policy decisions that could see Safaricom compelled to share its infrastructure with rivals at subsidised costs.

There is also the possibility that policy makers could also recommend that Safaricom’s various business units be broken up into independent entities besides compulsory inter-linkage of M-Pesa with other telcos’ mobile payment systems.

Safaricom’s competitors, who have previously claimed that the playing field is skewed in favour of the market leader said Thursday they were keenly awaiting findings of the study.

“There is a Dominance Study, whose findings we anticipate to be published in the next few months and we will be guided by it,” said Telkom Kenya CEO Aldo Mareuse.

Last September, Airtel Kenya CEO Adil El Youssefi said his company could exit the Kenyan market if new regulations are not passed to curb what it terms Safaricom’s dominance.

“We have been trying for over five years and have not made one dollar in profit. Airtel is likely to exit Kenya if the market structure is not addressed in terms of dominance,” said Mr Youssefi.

Mr Youssefi said “anti-competitive” behaviour by the market leader had condemned its competitors to loss making, claiming that it was the main reason Essar-yu, another operator, left Kenya two years ago and France Telecom exited Telkom Kenya last year.

Findings of the soon-to-be released study on the telecoms sector competition are expected to rekindle the bruising battle to influence the direction of telecom sector policy that in the past caused drastic fall in calling tariffs and introduction of number portability in the Kenyan market.

Among the issues expected to come out in the report is the level of financial transparency and tax payment records by the telecommunications firms, as well as their commitment to growth through investment in own infrastructure.

The CA contracted consulting firm Analysys Mason to probe the structure of the Kenyan telecoms market.

The communications regulator’s acting director in charge of consumer and public affairs, Christopher Wambua, said the study that kicked off in May this year is 80 per cent complete and a stakeholders’ dissemination workshop is scheduled to take place soon.

The consultants are expected to establish any anti-competitive behaviour in the market and evaluate the extent this has helped players entrench dominance in telecommunication sub-sector.

Safaricom has vigorously defended its operations, hitting out at rivals over their claims that it is dominant and in abuse of its market leadership.

Safaricom insists that the there is a level playing field in the market that has sustained what it deems fierce competition for customers.

“There has been no declaration of dominance in our sector at this time. It is important to note that M-Pesa has achieved its current market position after nearly 10 years of sustained investment in building the required technologies and agent networks to ensure that it remains relevant to the market needs,” Safaricom said in a statement, adding that “the mobile money market is fiercely competitive and we have been pleased to see the segment continues to grow for all operators, including new entrants.”

Dismissing calls by its rivals for the enhancement of inter-linkage with its mobile service, Safaricom said that mobile money operators not only in Kenya, but also across the region, have established interoperability agreements for mobile money, including sharing of agent networks, and enabling transactions between systems.

“We believe that any operator who wants to succeed in this market must commit to investing in a compelling product for their customers. In addition, Safaricom is in current discussions with five companies on more comprehensive interoperability for M-Pesa,” it said.

Safaricom maintained its growth has been organic and corresponds with similar growth in the market. The giant telecoms operator has also dismissed suggestions that it be broken up into different business units to check its alleged dominance.

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