Safaricom’s dominance leaves competitors with no option but to use its network.
Increasing the level of interoperability among the mobile network operators (MNOs) in Kenya will raise market reach and lower the costs of mobile money, new research shows.
The study, carried out by former Central Bank of Kenya (CBK) governor Njuguna Ndung’u shows that Safaricom’s control of a large proportion of the mobile money market gives it incentive to restrict access to competitors.
Prof Ndung’u, during whose reign as CBK boss Safaricom’s M-Pesa money transfer services were licensed and launched, said the cost of telecoms services was a major concern.
In the research, he pointed out that the current market structure is such that it gives rise to a fundamental conflict of interest for the largest operator as all other financial institutions are customers and competitors of Safaricom.
“The interoperability for mobile network operators and transparency in the costing of services are still concerns for telecommunication regulators and financial institutions. … The fact that Safaricom continues to lead the market creates a fundamental conflict of interest since all other financial institutions in Kenya remain customers of, and competitors to, one dominant MNO,” said the scholar in the study.
The research, titled Digital Technology and State Capacity in Kenya, was published last month by the Centre for Global Development, which works to reduce global poverty and improve lives through innovative economic research.
Quoting previous work by other scholars, Prof Ndung’u points out that “the presence of a dominant MNO leaves third-party providers with no other option to reach the majority of the market than to go through this MNO."
“This implies little incentive for the MNO to drive down the price of unstructured supplementary service data (USSD) technology, which is the dominant front-end technology used in the deployment of mobile banking services in Kenya,” he said.
The agency management model has been built around Safaricom activities with regulators imposing supervisory responsibility on the telco, it notes, adding that the resulting master agents model has pushed the M- Pesa success.
“The argument here is that interoperability is supposed to increase the market size, lower unit costs and enhance competition as well as efficiency, leaving market shares to depend on the products and services rolled out by the different MNOs,” he noted.
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