‘We will not punish success’ CA says of Safaricom split proposal

March 14, 2017 (3 weeks ago)
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CA Director General Francis Wangusi says the move could negatively affect the growing industry even as concerns over its dominance in the market remain/FILE

, NAIROBI, Kenya, Mar 14 – The Communication Authority of Kenya (CA) says it has no intention of splitting Kenya’s biggest company Safaricom Limited into two firms pointing out that it will not punish success.

CA Director General Francis Wangusi says the move could negatively affect the growing industry even as concerns over its dominance in the market remain.

Instead, the Authority says it is working to finalise a report on dominance in the telco sector to be released in May 2017.

CA has already received the draft report from its consultants and input from the Competition Authority of Kenya which will inform the final report.

“The report identified various markets the industry players are involved in and how they are operating. If some markets are skewed, we are going to intervene and regulate them,” he says, hinting that the voice market is unfairly competitive.

Among the markets that might be regulated if found unfairly competitive include issues of pricing, call location, interoperability among others.

Deputy Minority leader Jakoyo Midiwo has proposed amendments to the country’s communication and banking laws aimed at breaking up Safaricom which is 40 percent owned by Britain’s’ Vodafone.

Midiwo, who accuses Safaricom of offering banking services without the necessary license, aims to force the firm to run MPESA as a separate business from the telecoms service.

Safaricom CEO Bob Collymore has said a split of the mobile service provider and the M-Pesa platform will discourage investors as well as suppress innovative operators.

He also adds that should the two be separated, the cost of operations would be high on the customers.

“Safaricom represents 40 percent of the stock exchange and so it has certainly moved NSE into the worst performing stock exchanges in the world because of the proposals. Shareholders cannot see the sense in it; customers cannot see the sense in it because in splitting it you will increase the cost of transactions for customers. Why would you do that for the world’s most successful money transfer system?  A system which the MIT has said has lifted about 184,000 Kenyans out of extreme poverty,” Collymore said earlier this week in an interview with Capital Business.

Former Airtel Chief Executive Adil El Youssefi had said the company has faced a lot of challenges since its launch five years ago due to dominance which he termed as an ugly head for the business.

READ : Airtel Kenya CEO talks work, telco dominance and love for tennis

“The problem is that the dominant player is making all the profits which puts Airtel and other small players in a very difficult situation as it becomes hard to sustain ourselves. The dominant player, therefore continue to get stronger as they have the ability to invest more into their network,” he said.

In 2014, YuMobile ceased operations, selling off its assets and subscribers to its competitors, Airtel and Safaricom for around $100 million from its parent company, the Indian group Essar.

The deal saw Airtel take over Yu’s 2.7 million connections, while Safaricom receives control of Yu’s network.

France’s Orange last year sold its 70 per cent stake in Telkom Kenya to Pan-Africa-focused equity fund, Helios Investment Partners.

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