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Rules could split Safaricom’s revenue arms

Friday July 3 2015

LILIAN OCHIENG'
By LILIAN OCHIENG'
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Safaricom is staring at tough times as Parliament begins discussing regulations that will restrict its movements in the market and punish it for abusing dominance.

Information Cabinet Secretary Fred Matiang’i yesterday said he would table the rules in Parliament next week.

Dr Matiang’i has urged the Communications Authority of Kenya (CA) director-general, Mr Francis Wangusi, to prioritise the push to regulate dominant telcos as he starts his new term.

“Telecommunication firms need to be regulated to ensure some players are not strangled in the market,” said Dr Matiang’i during a media briefing to usher Mr Wangusi into his new term yesterday.

INDEPENDENT UNIT
If the Fair Competition and Equality of Treatment 2015 regulations contained in the Communications Act are passed by Parliament, Safaricom will be required to maintain separate books of account for each of its services such as M-Pesa, mobile phone services and the infrastructure.

Mobile phone services, for instance, will be handled as a separate and independent unit that runs the retail business of selling voice, SMS and Internet at prices controlled by the CA to ensure the prices are equal or slightly higher than those of other companies.

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The regulations describe a dominant player as a licensee that can “maintain or erect barriers to entry into the market, including, by means of control of essential facilities, access to superior technology, privileged access to resources or capital markets or superior buying or negotiating position, amongst others.”

A dominant player must also have a market share of 50 per cent or more.

Mr Wangusi said that Safaricom has more than 70 per cent market share but CA has not identified which market they are dominating.

Of the three players in the business (Telkom Kenya, Airtel and Safaricom), only Safaricom has consistently reported profits and has global technology and commercial trends affecting market power.

For the 12 months ending March, Safaricom recorded Sh31.9 billion profit after tax, making it the most profitable company in East and Central Africa.

ABUSE OF DOMINANCE

Airtel Kenya, the country’s second-largest telco with 16 per cent market share, has been pushing to have Safaricom declared dominant to give the other players some competition space.

The latest industry statistics show that Safaricom controls all segments of the telecommunications market — voice (75.6 per cent), SMS (93 per cent), mobile data (70 per cent) and mobile money (66.7 per cent).

The CA and the Competition Authority of Kenya (CAK) have signed memoranda of understanding with the International Finance Corporation, to strengthen their muscle in investigating and enforcing abuse of dominance in the sector. The two regulators have also agreed on what parameters to tackle.