Is declaring Safaricom dominant punishing success?

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BY ANTONY MUTUNGA

For years the local telecommunication sector has seen a fierce competition with Safaricom PLC leading the park in what has pushed competitors, Airtel and Telkom Kenya to argue that the leaders hold an unfair advantage over them.

Time and time again the competition has argued to the Competition Authority of Kenya (CAK) about the dominance of Safaricom that allows it to control market trends. However, each time the case has not yielded any result as the dominant Telco maintains a major market share. This constant discussion on dominance saw the Communications Authority of Kenya (CA) commission an international consultant, Analysys Mason to work on a comprehensive telecoms report in order to determine a way forward.

According to 2018 Analysys Mason’s Telecommunication competition market study in Kenya report, Safaricom holds more than 70% of the market share in terms of subscribers, minutes and revenue. In addition, Safaricom was also the leading Telco in terms of the mobile money market with a share of 66%.

The report supported the argument by the competitors as it indicated the dominance of Safaricom in the industry. It showed that Safaricom controlled a majority portion of the sector’s share and value.

Aldo Mareuse, Telkom Kenya CEO believes that the mobile operator has a market share that is too large when compared to other countries in the world and that that limits competition.

“We cannot continue to claim that the telecommunications industry is competitive. There is an urgent need for industry regulation,” he said.

The report states that because of the dominance in the retail mobile communications market, Safaricom raised some competition issues. For instance, the fact that the Telco is able to change its tariffs independently of its competitors puts it at an advantage. This lack of competition intensity and higher mobile tariffs ends up limiting competition and investment for the other mobile service providers. In addition, the lack of choice and due to strength of network in some rural areas, competition also tends to be limited giving Safaricom an advantage over its competitors.

Apart from the retail mobile communications market, the report also resulted in identifying Safaricom as a dominant player in the mobile money market as well. This can be accredited to the fact the mobile operator is able to change its tariffs independently of its competitors evident in how the M-Pesa tariff for transfers to non-registered users is consistently higher than those for Airtel Money and Orange Money.

Additionally, Safaricom is also accused of not investing in an M-Pesa app as a strategy to have only Safaricom subscribers to have access to M-Pesa. The telco player condones a lack of innovation to limit its competitors. For example, Safaricom stifled innovation in the market by opposing Equitel’s thin SIM technology and also charges third party providers’ high fees to chase them off. The report also indicated that its current position in the mobile money market also impacted its position in the retail mobile communications market.

The report by Analysys Mason proposed that Safaricom be identified as a dominant player in the sector and that the giant company be divided into two separate entities in order to deal with the dominance question. In addition, the consultancy firm also recommended other policies such as ensuring that in the mobile money market, both registered and unregistered users were to be custom to the same fee, the requirement to share infrastructure with the competition under a regulated pricing regime and mobile money interoperability which has already been adopted.

However, Safaricom has vehemently opposed the suggestion to be qualified as a dominant player in the industry. According to the giant telecommunications company, the recommendations given by the consultancy firm are like a punishment to the Telco for its success. Safaricom through its CEO, Bob Collymore argued in Parliament that declaring the company as a dominant player would only place the firm under greater regulatory scrutiny which would end up hurting the consumers and the economy at large.

“The Analysys Mason Report on Telecommunication Competition Market Study, on the basis of which the Communications Authority seeks to declare Safaricom dominant in certain market segments, proposes a number of remedies or interventions, the most important of which will be to punish Safaricom customers, stifle innovation, discourage investment and reward competitors who do not invest in their networks as they should,” said Mr Collymore.

Safaricom also argue that the competitors needed to invest more in order to reach their feat. The telco says that their investments are what have seen it reach its current state adding that it would not be pressured into making changes to its tariffs in order to increase its shares. It said it would not participate in a price war with its competitors as the move is unsustainable and it leads to reduced revenues.

The giant telco got a backing from the CAK who argued that the company was not using its dominance to its advantage in any of its business ventures and therefore, it would be wrong to punish them not only because they didn’t depend on their dominance to undermine its competition but also because any regulatory action on the organization will have ripple effects on the entire economy.

The current dominance of Safaricom on the country is indeed something that needs to be dealt with. This is because a large number of the country depends on the organization’s products and when something affects it, it has a large effect on the economy. For instance, any Safaricom network outage end up affecting a lot of people and leaving the economy in a standstill. However, it will also be unfair to punish the company for the success. Henceforth, there is a need to put up regulations that create an equal playing field for all the players in the industry.