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Economy

Safaricom may face sanctions over network outage

Safaricom headquarters on Nairobi’s Waiyaki Way. PHOTO | DIANA NGILA
Safaricom headquarters on Nairobi’s Waiyaki Way. PHOTO | DIANA NGILA  

Telecoms operator Safaricom #ticker:SCOM on Monday came under intense regulatory pressure after its network was hit by an outage that left millions of customers in a communication blackout estimated to have cost the economy billions of shillings.

The network outage began at about 9.40 a.m. and persisted till 4.30 p.m. and the cause was yet to be made public by close of the day.

Millions of Safaricom subscribers were unable to make voice calls, send text or move money through the popular mobile money transfer platform, M-Pesa.

The Communications Authority of Kenya (CA) warned that unless the shutdown was caused by an “act of God”, Safaricom would face sanctions — insisting the regulator does not tolerate downtimes of more than one hour.

Francis Wangusi, the CA director-general, said the agency had also been left in a “communication blackout” and had been forced to “physically” send people to Safaricom just to get an idea what was happening. 

“I want to say that those are the risks of probably having too much dominance in the market by a few players or so, because you don’t spread the risk,” said Mr Wangusi.

Safaricom is estimated to have lost at least Sh2.6 billion M-Pesa transactions during the near seven-hour outage whose ripple effects on the economy are expected to be huge.

CA statistics show that about Sh3.3 trillion moved through the M-Pesa platform in the year to December 2016 — translating to an average Sh9 billion per day or about Sh376.7 million every hour.

Bob Collymore, the Safaricom chief executive, said the telecoms operator had lost connectivity in its core network and the redundant path, leaving it in a difficult position.

“…We lost connectivity into our core network as well as the redundant path. This shouldn’t happen. It is unusual that both failed,” said Mr Collymore in a statement that also included an apology to customers.

It was impossible to make calls on the network for at least one and a half hours. Network fluctuations persisted during most of the day although Safaricom said late afternoon that it had found the cause of the problem and restored the network.

M-Pesa agents were among the biggest losers in the day-long blackout that stalled their business for more than six hours.

“We’ve barely done any business today. It’s been so quiet,” said Patricia Kamuya, who runs an M-Pesa agency on Nairobi’s Moi Avenue.

With 27.7 million customers, 71.2 per cent of the market share, Safaricom is the largest telecoms firm in Kenya with a significant presence in the financial services market through its M-Pesa platform.

Monday’s outage had a domino-effect on the economy, bringing to the fore a worst-case scenario that the Treasury warned about last year.

Multiple banks have hooked up their systems to M-Pesa, including Kenya’s biggest KCB, which warned its customers about “network challenges”.

During the outage, Safaricom customers had to jump through more hurdles to pay their electricity bills, shop, pay court fines, send money to relatives, and even to place their bets with gambling firms.

Last year, the Treasury identified technological disaster in the M-Pesa-dominated mobile money sector as a potential fiscal risk for Kenya, saying a blackout on the platform could cost the government “substantial” losses in corporate tax revenue.

Safaricom assured customers that “their balances and the integrity of [its] system are intact”.

The outage comes in an election year when Kenyans are increasingly jittery about the reliability and privacy of messages they send via telecommunications networks.

The CA requires operators to provide redundancies for their networks and the fact that Monday’s outage took out both the main and redundant networks at Safaricom, indicates that perhaps the present safeguards are not enough.

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