Splitting Safaricom will change little for static competitors

What you need to know:

  • In short, Safaricom has argued that its success should not be penalised, being dominant is not a crime, and the company has no apologies for it.
  • Sh6.5 billion every day is a huge figure in any currency and has a huge impact on the velocity of our Kenyan economy.
  • Unfortunately, the ruling did not quite assist Netscape, which eventually died a natural death leaving Microsoft to meet its real competition ten years later from an entirely different and unlikely quarter – the tablet and search engine markets. 

Recent reports indicate that the Cabinet Secretary for Information is entertaining thoughts of splitting the mobile giant Safaricom, after being prompted by one of its competitors, Airtel. 

Safaricom has continued to dominate the market and competitors seem unable to break into the large customer base that Safaricom enjoys across its voice, data and mobile money offerings.

Recent statistics  from the Communications Authority of Kenya (CA) indicate that Safaricom continues to reign in the telecommunications sector with 75 per cent, 71 per cent and 74 per cent market share in the voice, data and mobile money markets respectively.

But is dominance sufficient reason to warrant administratively splitting a company into smaller business units, allegedly in order to give competition some slack and a fighting chance?

Safaricom has repeatedly said that their market share is a reflection of their ability to compete and innovate according to ever-changing market conditions. In short, Safaricom has argued that its success should not be penalised, being dominant is not a crime, and the company has no apologies for it.

Whereas success, particularly entrepreneurial success should be acknowledged and celebrated, it often hides deeper questions that should concern the regulator and society in general.  Top on the list is the fact that as country, we have become victims of our own technological success.

Safaricom moved Sh2.4 trillion over its MPESA platform last year, more than twice our national budget for the same year.  This means that 20 million of 27 million Kenyan mobile money subscribers are pushing a total of Sh6.5 Billion on a daily basis over the MPESA platform.

Sh6.5 Billion every day is a huge figure in any currency and has a huge impact on the velocity of our Kenyan economy. This fact has been globally celebrated and continues to earn the country those very rare and positive international reviews that we yearn for.  

VIABLE ALTERNATIVE

However, this very fact presents a single point of failure for our money market, and by extension the stability of our nation state. In technical terms, we do not have a back-up mobile money system that can take over, in the unlikely event that MPESA fails for one reason or the other. 

Airtel money, the closest competitor to Safaricom MPESA has only 11 per cent of the market supported by a much lower geographic, agent and merchant distribution network.  Given the above conditions, it will be hard-pressed to act as a viable alternative to MPESA.

Put differently, if MPESA were to malfunction for a full day, the Kenyan economy risks slowing down by at Sh6.5 Billion – the amount of money that would have otherwise been transacted that day.

It is highly likely that by the second or third consecutive day of failure, Kenyans would hit the streets in protest.

It is for this reason that we must begin to have a conversation around creating alternative, viable sources of mobile money transfers.  Not because we hate Safaricom or MPESA, but because we love Kenya much more.

Having said that, we also need to interrogate whether splitting up Safaricom would achieve the intended purpose, that is, provide an alternative viable source of mobile money transfers. 

NETSCAPE ‘DIED NATURALLY’

Some would argue that the competition would still not gain the necessary traction into the Safaricom dominant market share.

And they may be quite right.  In the mid-1990s, the European courts ruled in favour of splitting Microsoft by forcing it to separate its then emerging browser application “Internet Explorer” from its then leading flagship product, the “Windows” operating system. 

Apparently, Microsoft had coupled the two products tightly together so that competing browsers such as “Netscape” were unable to survive in the market – which was then 90 per cent controlled by Microsoft through its flagship Windows product.  It’s very similar to what Safaricom does with its flagship MPESA product, by building and coupling its other products around it.

Unfortunately, the ruling did not quite assist Netscape, which eventually died a natural death leaving Microsoft to meet its real competition ten years later from an entirely different and unlikely quarter – the tablet and search engine markets. 

In other words, we do face the risk of splitting up a giant and still failing to resolve the dominance factor. Let the ministry and the regulator put on their thinking caps and give us a better answer to the dominance issue we continue to face in the telecommunication sector.

Mr Walubengo is a lecturer at the Multimedia University of Kenya, Faculty of Computing and IT. Twitter:@jwalu Email: [email protected]