Telco market debate could see Safaricom split into two - Daily Nation

Telco market debate could see Safaricom split into two

Sunday February 18 2018

The Communications Authority of Kenya head office in Nairobi. file PHOTO | NMG

The Communications Authority of Kenya head office in Nairobi. file PHOTO | NMG 

By BRIAN NGUGI
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Heated debate is expected this Tuesday over a controversial telcoms report commissioned by the Communications Authority following a detailed study on market dominance.

Policies crafted from this debate could see giant Safaricom #ticker:SCOM compelled to share its infrastructure with rivals at subsidised costs.

The draft report dated March 20 last year has been receiving input from the industry’s main operators.

It was written by MS Analysys Mason, the London firm retained by the CA for the market dominance study in Kenya.

The CA has now invited operators and the public to a Nairobi hotel on Tuesday to disseminate the findings of the study on market dominance.

A similar public debate on the report called by the regulator last August was cancelled in unclear circumstances.

“As you are aware, the Communications Authority of Kenya, (CA) contracted MS Analysys Mason to carry out a competition study of the telecommunication sub-sector with a view to evaluate the competitive landscape of the market,” said the authority in a notice published in national newspapers on Friday.

“The study was specifically meant to foster a competitive telecommunications market, which can attract sustainable investments, provide more choices to consumers and increase consumer welfare through the provision of affordable high quality services,” said the regulator.

The public debate, as required by the Constitution, is expected to pave the way for far-reaching policy decisions.

Airtel and Telkom Kenya have over the years accused market leader Safaricom of occupying a dominant position that has tilted the playing field in its favour.

A draft report on behalf of the authority released last March said Safaricom is dominant in the mobile money and mobile communications sectors and that steps should be taken to improve competition, or the company should be broken up.

But Safaricom has criticised the proposals — first mooted in June 2016 — to split the company. The government, on the other hand, has said it is opposed to measures that would stifle innovation.

“The consultants have undertaken the study and submitted draft findings to the authority. In this regard, the authority invites industry players and other stakeholders, including members of the public, to participate in an interactive stakeholder consultation workshop scheduled to take place on Tuesday, February 20, 2018, at Hilton Hotel, Nairobi,” said CA.

Safaricom rivals have been pushing the regulator to implement rules that will restrict the dominance.

“The regulation for a dominant operator already exists,” Telkom Kenya chief executive officer Aldo Mareuse told Bloomberg in July last year. “It’s just a matter of implementing it... as soon as possible because otherwise it just endangers the industry.”

In 2016, the Treasury warned that collapse of mobile money service M-Pesa could cause widespread disruption of the economy, renewing debate as to whether Safaricom is a dominant player in Kenya’s telecoms market that requires extra regulatory action.

Some experts have argued that the regulator should consider the introduction of lower, asymmetric call termination rates to facilitate growth of smaller operators. Call termination rates are the rates a telecommunications operator charges for carrying another operator’s calls.

Each of the operators in Kenya currently pays the same rate to each other.

Safaricom’s share of the voice calls market rose to a five-year high in the year ended June 2017, underscoring the company’s continued dominance.

Data from CA released last October shows that Safaricom had 80.4 per cent share of voice traffic, up from 75.7 per cent the previous year.

Safaricom’s dominance of the voice market last rose past 80 per cent in the year ended June 2012.

Kenya’s two other telecoms operators, Telkom Kenya and Airtel, saw their share of voice traffic shrink, signalling the challenge they face fighting for space in a market dominated by the Safaricom behemoth.

Telkom Kenya’s market share fell from 8.6 per cent in 2015/16 to 6.3 per cent in 2016/17 while Airtel’s market share fell from 15.4 per cent to 12.9 per cent, according the latest industry report.

The CA attributed the changes to pricing decisions made by the two smaller operators.

Upward reviews made to voice and data tariffs have seen customers either flee from the smaller operators or choose not to use those networks when making calls, the CA report says.

The report painted a dark picture on competitiveness of Kenya’s telecommunication sector, questioning the ability of the smaller operators to survive in the current market structure.