Why consultant backed away from plan to split Safaricom

What you need to know:

Analysys Mason has since May 2016 been studying the Kenyan telecommunications sector to identify competitive factors that make Safaricom the only profitable firm.
An initial draft of the study, leaked to the media in February 2017, had proposed implementing mobile money inter-operability by the end of last year failure to which Safaricom would be split into two units.
Safaricom and Airtel are already trialling inter-operability of mobile money transfer, which will see customers send and receive money across networks in real time.

A consultant hired to study competition in the telecommunications sector says it set aside a proposal to split M-Pesa from Safaricom #ticker:SCOM because it considered the measure too extreme.

Analysys Mason has since May 2016 been studying the Kenyan telecommunications sector to identify competitive factors that make Safaricom the only profitable firm.

An initial draft of the study, leaked to the media in February 2017, had proposed implementing mobile money inter-operability by the end of last year failure to which Safaricom would be split into two units.

“We felt that this remedy could be seen as disproportionate, in relation to a delay in implementing wallet-to-wallet interoperability, and furthermore it constrained the CA’s discretion to act as it saw fit,” said Philip Bates, a principal at Analysys Mason.

Safaricom and Airtel are already trialling inter-operability of mobile money transfer, which will see customers send and receive money across networks in real time.

Mr Bates was speaking during a public forum to discuss the report ahead of its final publication.

He said the consultant had followed a similar rationale in reducing the number of counties that Safaricom would be required to share infrastructure, from the original 14 to seven, in the latest report.

The consultant maintained that extra charges on cross-network mobile cash transfers should be scrapped. The underway pilot study on interoperability has not yet addressed the issue of charges that consumers will pay for these services.

Analysys Mason further recommended that interoperability also apply to mobile money agents.

This would mean that agents could serve customers from different networks using the same float.

However, the consultant says that this will be an issue that ought to be addressed by the Central Bank of Kenya rather than the CA.

Airtel’s chief regulatory officer for Africa, Daddy Mukadi, called for speedy implementation of the report.

Safaricom, on the other hand, said that implementing the findings of the report could wind up punishing its investments and victimising its subscribers.

“We agree that this is highly desirable but this is an area we think falls outside the Communications Authority and is much more about banking regulations,” said Mr Bates.

The overlapping regulatory mandates of the CA and the CBK became a heated subject of debate during the session yesterday with some stakeholders arguing that perhaps issues of mobile money were best left to the banking regulator.

Mobile operators also protested the manner in which the study had been carried out.

Airtel’s chief regulatory officer for Africa, Daddy Mukadi, called for speedy implementation of the report. Safaricom, on the other hand, said that implementing the findings of the report could wind up punishing its investments and victimising its subscribers.

Questioning the methodology used to compile the study, especially in light of the entry of Jamii Telecom to the market, Safaricom called for a fresh start.

“I daresay that maybe we need to have a total review of the study to take into consideration changes that have happened in the last one year,” said Mercy Ndegwa, who heads the firm’s regulatory and public policy department.

The CA has said that it will give the consultant one month to take into consideration public input and finalise the report. The Authority should decide whether it will implement the proposals within three months.