Parliament set to discuss rules to tame Safaricom’s dominance

Telecoms

Mobile telephony market leader Safaricom may be forced to split its businesses, subject interconnectivity fees charged to other providers to government approvals and share some of its platforms including its facilities and MPesa platform if proposals by the government are approved by Parliament.

The 14 rules seen by the Sunday Nation promise to open a new battle front between Safaricom and Airtel who have been perennial rivals in the lucrative communications business.

Safaricom’s  marketing budgets will be subject to approval by government and the company will no longer be able to react to competition by immediate adjustment of its pricing, which could affect its profits.

Information Cabinet Secretary Fred Matiang’i will this week make these proposals in an effort to declare the communications giant dominant and give a chance for the other players to grow.

The Kenya Information and Communications (Fair Competition and Equality Treatment) Regulations 2015 would give the government power to determine the suitability of market segments to services provided by communications products.

HUGE PROFITS

Among the considerations that the government intends to use in order to declare Safaricom a dominant player are its huge profits and the nature of its products that are seen to be creating barriers to other players.

“The criteria for determining a licensee as dominant may among other factors include the ability of the licensee to 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 and its ability to earn supernormal profits,” says a draft of the regulations seen by the Sunday Nation.

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

Of the three players in the market, Safaricom is the only one that has consistently reported profits. During its full year result for 2014 released in March, the company reported Sh31.9 billion.

Both Airtel and Orange are yet to report profits while YU exited the market last year after failing to break even. Airtel, which controls 16 per cent of the market, has been pushing to have Safaricom declared dominant.

“A dominant licensee shall maintain separate books of account for each service as may be prescribed by the Authority from time to time and shall not cross-subsidise the prices for any service it offers in the market,” says the proposal.
Source: Daily Nation 7 July 2015