NGUGI: CA has to declare Safaricom dominant - Daily Nation

CA has to declare Safaricom dominant

Friday January 5 2018

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

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

By KIRIRO WA NGUGI
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I read with considerable dismay and disbelief a report in the Business Daily titled Regulator drops plan to split up Safaricom.

This headline is, in the first place, a serious misrepresentation of fact: The Communications Authority (CA) never planned to split Safaricom. Never! On the contrary, it often acts as an impotent regulatory authority.

The CA has succumbed to government control and done everything to protect and maintain obvious Safaricom dominance, against the greater public interest inherent in declaring the telco’s dominance formally and legally.

That would remove the serious entry barriers for new and better entrants to the sector to nurture more effective competition as dictated by international best practice.

This was the core recommendation by London-based consultancy firm Analysys Mason, hired by the CA itself. But the report has been watered down and, if media reports are to be believed, will eventually be ignored and trashed.

INFLUENCE

Few Kenyans appreciate the true extent of Safaricom’s influence, the depth and breathtaking grip it has on the Kenyan society, the damage such grip could cause and the constraints and contradictions faced by the CA in trying to regulate this mammoth monopoly in which the government has a 35 per cent stake. A similar portion is foreign-owned.

Safaricom has a subscriber base of 23.3 million, out of a national population of 45.6 million and total mobile subscriber base of 33.6 million. Put another way, it holds as subscribers more than half of Kenyans and, by another metric, 88.25 per cent of the entire adult population in the country.

This is to say Safaricom has in its grip the voice communications, data, finance transactions (individual and business), location information and full bio data for 88 per cent of the Kenyan adult population.

By this measure, it is the primary arbiter of all social and economic relations. It has become the new centre for vital national information, which is the real source of power, including political power. It reportedly even has direct access to all data of our national register of persons!

DATA

In that sense, Kenya is, quite literally, a ‘Safaricom Republic’—because Safaricom is unique, not just in the fact that it straddles commerce, banking, security surveillance, election results transmission, entertainment and voice and data communications but also in the depth of its dominance in terms of reach in numbers, brand and socio-political power.

The fact that the opposition coalition Nasa dragged Safaricom into the 2017 presidential election petitions, in terms of power relations, is very significant.

Safaricom holds all the societal tools of commerce, arbitration, power and oversight without express political mandate, authority or culpability. Here-in lies a huge problem, and we should either agree to have handed over the scepter of power to Safaricom or cleave its size and dominance.

ECONOMIC RENT

The M-Pesa transaction fee, for instance, by virtue of its ubiquity and inescapability (it is extracted from over 88 per cent of the adult population) is a society-wide economic rent and, by default, a tax!

The declaration of Safaricom dominance is a much bigger issue than the pedestrian arguments of “rewarding inefficient competitors” or “punishing success” often proffered in support of the gigantic telco.

The CA has the powers and legal obligation to declare Safaricom dominant. However, one of the reasons for the Analysys Mason study was that it could not legally do so without technical due diligence.

However, that has now happened. The report has specifically determined that. It states: “The market analysis concludes that Safaricom is dominant in both the mobile communications and mobile money markets.

“In both of these markets Safaricom enjoys, and has enjoyed for a long time, a very high market share (above 80 per cent in value).”

BUSINESS

The first order of business for the CA is, therefore, to declare Safaricom dominant. This has important implications and attendant remedies in the promotion of more equitable competition.

For example, under the EU framework that the report has adopted as best practice, “asymmetric termination charges” across networks is commonplace. This provides better outcomes for customers, which must be the core outcome of this public debate on the Analysys Mason report.

 Mr Ngugi is a consultant in public affairs and policy. [email protected]