Technology

Airtel challenges Safaricom supremacy in money-transfer industry

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Airtel Networks Kenya Ltd. has asked the country’s competition authority to probe Safaricom Ltd. for allegedly abusing its market-leading position. BD Graphic/FILE

Airtel Networks Kenya Ltd., which is targeting a share of Kenya’s mobile-money transfer business, asked the country’s competition authority to probe Safaricom Ltd. for allegedly abusing its market-leading position.

Airtel is teaming up with Equity Bank Ltd., the country’s biggest lender by market value, to begin operating a mobile-phone banking product in July.

The service will compete with Safaricom’s M-Pesa, a system that enables users to send money by mobile-phone and generated 26.6 billion shillings ($303 million) of revenue for the company last year.

Safaricom, in which Vodafone Plc has a 40 per cent stake, had 78 per cent of the voice market, 96 per cent of text messaging and 74 per cent of mobile-data and Internet traffic in the final quarter of 2013, according to data from the state-run Communications Authority of Kenya. Airtel, Kenya’s second-largest mobile operator after Safaricom, recorded 11 per cent, 3 per cent and 15 per cent in those categories respectively.

“Currently there is a dominant player in the market and this makes it impossible for Kenyans to make a choice,” Airtel Kenya Chief Executive Officer Adil El Youssefi said in an interview on May 25 in the capital, Nairobi.

Since cash transfers still account for 98 per cent of total transactions in Kenya, it’s impossible for any mobile-money entity to be a dominant player in the payments market, said Safaricom Corporate Affairs Director Nzioka Waita in a May 28 e-mailed response to questions. “I would hesitate to rush to any empirically unsubstantiated assumptions about dominance or abuse therefore,” he said.

The Competition Authority of Kenya has received the complaint filed by Airtel, spokeswoman Elizabeth Ntonjira said in an e-mail.

Telecommunications is among several industries being examined for possible abuse of dominance in a probe that is expected to be completed by July, Francis Kariuki, director-general of the competition authority, said last month.

The East African nation of 43 million people had 31.3 million mobile-phone subscriptions by the end of last year, of which Safaricom accounted for 68 per cent, Airtel 17 per cent, Essar Group’s yuMobile 9 per cent and Telkom Kenya Ltd. 7 per cent; all of which are based in Nairobi.

Under Kenyan law, a company that controls at least half of the trade of services or goods is considered dominant, a position that can be abused through practices including unfair pricing or restricting market access. A conviction of abusing a dominant market position can lead to a five-year prison term and as much as a 10 million-shilling fine, according to the Competition Act.

“Hopefully by this July the situation will change,” said El Youssefi.

In April, Kenya’s telecommunications regulator granted approval for Safaricom and Airtel to buy yuMobile and it’s considering awarding licenses for at least three more telecommunications companies. Orange SA has said it may cut its holdings in Kenya, where it owns 70 per cent of Telkom Kenya.

-Bloomberg-