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Safaricom’s stock at 8 month low

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By end of Thursday, Safaricom stock price ended the day on an 8 month low of Ksh 16.00. This has shaved off more than Ksh 180 billion worth of capital gains from an all-time high of Ksh 851.3 billion the company touched last year in November. During the period, the company’s shares traded at Ksh 21.25.

The Telco now has a market value of Ksh 667 billion with foreign investors selling off massively in the last 4 weeks. This is in reaction to new recommendations that seek to regulate the telecommunications sector.

Some of the recommendations meant to enhance competition in the industry include separation of Safaricom’s M-Pesa services from the company’s core telecommunications business. This will have the effect of increasing running costs for the company due to a duplication of roles. The company is also faced with the prospect of opening its M-pesa platform to competitors.

Safaricom being asked to set the same off-net and on-net tariffs to reduce its domination in its voice sector.

“Due to its position and its size in the market, Safaricom is likely to be declared dominant in most key product categories, and thus potentially subjecting the company to more punitive reporting (with separate books for each service); wide interoperability to the M-Pesa platform,” Standard Investment Bank (SIB) said in a recent report.

However, ICT cabinet secretary has opposed the move with the view that such regulation will discourage innovation and investment in the ICT sector.

Safaricom is also facing off with banks which have teamed up to launch a mobile money platform that offers cheaper rates than the Telco’s M-pesa platform. The mobile and internet banking platform allows one to send Ksh 1 million in a single transaction as compared to Safaricom’s Ksh 70,000 a transaction. According to SIB, large value transactions will especially be cost effective and attractive for customers using the platform. This could move major payments back to the banks.

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Melissa Daniels
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TELECOMMUNICATION