Price controls defy the country’s market economy policy

Last year was a difficult period for businesses all over the country.

According to official reports, Kenya’s economic growth slowed to 4.9 per cent, fuelled by political uncertainty as the country dealt with the effects of a prolonged electioneering period.

The credit market also recorded the slowest growth in 14 years, attributed to the interest rate capping and reduced economic activity.

In addition, consumers bore the brunt of high food prices occasioned by persistent drought and strained household budgets.

Government reports show the Information and Communication sector expanded by 11 per cent in 2017.

DYNAMIC MARKET
The strong performance was supported mainly by growth in the digital economy, mobile telephony, e-commerce, online training, tax administration, among others.

On the competition front, we have read reports about a proposed merger between two of our competitors.

We have also seen the entrance of new players into the industry, both telco and non-telco.

These developments are evidence of a highly dynamic market whose biggest beneficiary is undoubtedly the consumer.

We continue to observe with great interest changes in the regulatory environment, which will continue to be an area of focus for us, as we evaluate our position in light of recent recommendations put forward in a draft industry study commissioned by the Communications Authority.

REGULATION

The competition study, which was carried out by Analysys Mason, proposes a number of interventions that are of serious concern to us.

These include attempts to change the rules of the game by introducing price controls and regulated infrastructure sharing.

While yet to be agreed and implemented, the mere fact these suggestions have been brought forward is an indication we could be heading into an era where success — rightfully earned through well-structured market strategy, innovation and investment — is penalised.

Our position is operators should be left to negotiate infrastructure sharing arrangements in commercial terms, as is happening already.

Introduction of price controls on infrastructure sharing arrangement runs the risk of players abandoning investing in their network as they wait to be hosted, eventually hurting customers.

ECONOMY POLICY
The draft study report also contains recommendations such as the requirement that Safaricom can only rollout services replicable by competitors, and others seeking to curtail our ability to advertise and create promotions targeted at various consumer segments.

These recommendations will not only stifle our ability to innovate for our customers and limit our reach, but also leave us wondering how such a move would benefit the 40 million plus mobile subscribers in the country — which is what any intervention by the regulator ought to focus on.

We have said this time and time again: The telecommunications sector in Kenya is liberal and competitive, and operators should be left to compete on quality, price and innovativeness of services.

Attempts to introduce retail price controls are retrogressive, anti-consumer and unjustified.

In any case price controls are against the country’s market economy policy.

CUSTOMER BASE
In light of these developments, we continue to engage the Communications Authority in pursuit of a more considered outcome that will lead to a win-win result.

We will continue to invest in our business, guided by our brand purpose of transforming lives.

This purpose, together with sustained focus on the three pillars of our strategy — putting customers first, providing relevant products and services, and enhancing our operational excellence — continues to generate favourable results.

We see growth in our customer base helping us maintain our leadership position in subscriber market share.

More of our customers are now regularly active, and are spending more on our products and services.

GROWTH
Looking ahead, we remain steadfast in delivering on our strategy and growing shareholders’ wealth while putting people before profit.

It is a long-term strategy that is already paying off, and one that we believe is integral to the growth of this company.

We are happy that despite the headwinds our investors continue to show faith in our ability to deliver sterling performance.

I would like to reiterate that we remain committed to transforming lives, and we will continue to listen, innovate and collaborate.

Mr Nganga is Chairman, Safaricom PLC; [email protected]. This is an abridged version of the statement delivered when Safaricom PLC announced its 2018 results