Safaricom should not be punished for dominance in market, says Collymore

“We again wish to clarify to our customers, investors and the general public that Safaricom has not been declared dominant, has not engaged in any activities that may be deemed to be anti-competitive and we do not believe that Safaricom’s retail prices will be regulated, said Mr Collmore.

The mobile company has in the past been on a collision course with CCK over the ‘dominance’ tag that means strict measures are to be imposed on the company’s operations.

Safaricom with a 71 per cent market share can be declared as dominant according to competition case law which states that a market shareholding of over 50per cent indicates irrefutable dominance while that of 40per cent suggests possibility of dominance.

According to the new CCK rules, a service provider will be considered dominant in a particular segment of the market if their gross revenues exceed 25 per cent of the total revenues of all licensees.

In fact under the new rules, Safaricom’s super profits are expected to come under intense scrutiny as the regulator moves to flatten a playing field that has proved to be a hard nut to crack for many players – especially market entrants.

CCK will however use a variety of metrics to determine a licensee’s market dominance using key parameters such as revenue share.
“We wish to clarify that at this time Safaricom Limited has not been declared dominant and no regulatory interventions have been pronounced against us,” reads Safaricom’s statement in part.

“Even if CCK makes a finding of dominance against Safaricom it must demonstrate that Safaricom has abused such dominance before it can make any remedial interventions…we believe Safaricom has attained its current market share based on fair competition on the back of innovation…in any event, retail price controls is considered a drastic measure of last resort and the Kenya Government has been clear that it will avoid retail price controls in competitive markets,” said Mr Collymore

Under the Kenya Information and Communications Act and the Regulations therein, the CCK has powers to manage certain aspects of competition in the telecommunications industry. It is able to identify different market segments (typically based on products and services), examine the levels of competition in those market segments, make declarations of dominance, carry out tests to determine whether there has been abuse of dominance and in such cases implement proportionate and appropriate remedies.

Mr Collmore said the indication in the Consultation Paper that the CCK may regulate Safaricom’s retail mobile voice and SMS services “ is not an eventuality we believe will be implemented at the conclusion of this consultation process.”

Safaricom and all other operators have been given up to the August 26, 2011 to give submissions to this consultation.

“We expect that CCK will carry out further consultations before any pronouncements are made. With regard to prohibition of cross–subsidization, these are obligations that are already embedded in Safaricom’s operating licenses and with which we are already complying It is our view that the recently enacted Competition Act and the newly created Competition Authority, which is the ultimate authority on competition issues in Kenya market, should be engaged in this process,” appealed Mr Collymore.

Safaricom has ben insisting that retail price controls are usually a measure of last resort and has questioned CCK’s mandate to re-evaluate competition citing the Competition Act and establishment of the Competition Authority.

Telkom Kenya also argued that the regulator was at fault for not licencing other fixed line operators as dominance as a sole player cannot be controlled. External consultants from the UK have stated that in order to declare a player dominant, CCK has to demonstrate that competition has not developed effectively between the players and strong and permanent barriers to entry exist in the market