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Ideas & Debate

Why Safaricom is opposed to CA's style of regulating market dominance

Airtel money and Safaricom M-PESA shops
Airtel money and Safaricom M-PESA shops adjacent to each other on Banda Street, January 10, 2012. FILE PHOTO | NMG 

Whether it is making social calls to family and friends, engaging in business at SME or enterprise levels, Safaricom #ticker:SCOM believes its mission is to transform lives.

Through technology we enable farmers to improve how they farm and access farm inputs; we enable learners to access education materials through platforms we have developed through partnerships such as (Shupavu 291).

Besides, Safaricom’s technology enables Kenyans to access medical services even in remote areas and bridge the geographical challenge of access to medical care. The list is long.

Safaricom started as a small department within the then Telkom Kenya, to the company that today serves close to 30 million Kenyans with a diverse set of services.

Because of this growth, fuelled by a consistent and well-loved brand, a deliberate focus on investment in our network and people (including our dealers and agents), a DNA of innovating around our customers’ needs, dedicated focus on strategy execution and a culture of putting Kenyans first through our numerous CSR activities – we are now considered a Dominant Operator that should be singled out for punishment for simply being successful. This is true in spite of the regulator’s assertions to the contrary.

Let me explain.

The Analysys Mason Report on Telecommunication Competition Market Study, the on basis of which the Communications Authority (CA) seeks to declare Safaricom dominant in certain market segments, proposes a number of remedies or interventions the import of which will punish Safaricom’s customers, stifle innovation discourage investment and reward competitors who do not invest in their networks as they should.

In essence this Report seeks to introduce retail price controls on Safaricom’s services, effectively raising the applicable rates of Safaricom’s services, making the services more expensive to the customers, and forcing them to migrate to competitors’ services based on cost considerations.

This is essentially creating an artificial competitive landscape that rewards Safaricom’s competitors and disadvantages Safaricom’s customers.

The report makes the following recommendations against Safaricom:

Prohibition on individually tailored loyalty schemes and promotions – That Safaricom may not offer loyalty bonuses or promotions such as Tunukiwa and Blaze for which the qualification criteria require different levels of expenditure or usage by different subscribers in the same category.

Replicability of retail tariffs. That Safaricom’s standard tariffs, permanent loyalty schemes and promotions should be capable of being profitably replicated by a reasonably efficient competitor. At least five days before launching a new tariff, loyalty scheme or promotion, Safaricom should provide justification that the proposals can be replicated by a reasonably efficient operator, for which the key parameters (market share, cost structure etc.) will be defined by the CA.

This suggests that Safaricom should be sharing its innovations, strategies and market approach with competitors beforehand for them to demonstrate whether they can replicate before they are offered to Kenyans. Effectively, Safaricom is expected to innovate and share its innovations with competitors.

Prohibition of on-net discounts. That Safaricom should not be permitted to charge different rates for on-net and off-net calls or messaging to any customers under any circumstances. This includes a requirement that any bonus airtime granted to Safaricom customers should be usable for on-net and off-net calls and messaging at the same rates. All Safaricom advertising marketing materials referring to tariffs, promotions and customer loyalty schemes should make it clear that on-net and off-net tariffs are the same. Safaricom implemented this measure for the last three years and have continuously publicised its calling rates on the website, promotional materials and through the media. We however note that our competitors are doing this and are not prohibited.

Prohibition on surcharges for cross-platform money transfers. That Safaricom should apply the same fee structure and fee level on transfers to registered and unregistered users, including users of other platforms. The fee for cross-platform transfers shall include the fee for cash withdrawal at the Safaricom agent (as it does now) until such time as full wallet-to-wallet interoperability is available. We recommend that wallet-to-wallet interoperability be a symmetric obligation on all operators and for this reason we discuss this remedy in the next section. This is already happening based on interoperability whereby the charge for sending money to an Airtel customer is the same as the charge for sending money to a Safaricom customer. Interoperability was achieved through an operator-led process supervised by the CBK and Ministry for ICT. We expect to extend this to Telkom Kenya and all other mobile money service providers in Kenya.

National roaming. It has been proposed that for a period of five years, Safaricom should made to provide 2G, 3G and 4G roaming on its network to other Tier 1 mobile operators in the counties identified for regulated tower sharing. National roaming is the ability of one network operator e.g. Safaricom to deliver the calls of another network’s operator e.g. Airtel/Telkom Kenya through the Safaricom network.

Safaricom’s concern with a blanket national roaming intervention is that this rewards operators, who have not invested in rolling out base stations throughout the country, as all Tier 1 licensees are obligated to do. It means that such operators avoid the hard work and investment costs required to roll out services to customers.

Ultimately, these interventions are only targeted at Safaricom’s customers and investments. This is clear as quoted from the Analysys Mason Report above. This is in spite of the fact that the same Report has not found Safaricom to be abusing dominance in any way.

, the Safaricom CEO made this presentation to parliament’s committee on ICT, which is inquiring into Legislative And Regulatory Gaps Affecting Competition In Kenya’s Telecommunications Sector.

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