Is Safaricom too big to regulate?

Remember the article we ran here on Has Safaricom fallen out with the Government? Well, the war has not died but rather it is brewing into something else. On Saturday the East African ran an article on Safaricom, CCK clash over checks in which Safaricom claims that the checks by CCK that ranked it the poorest provider of mobile services was erroneous. Independent checks (apparently that Safaricom paid for) gave Safaricom a rating of 87.5%, 37.5% points above CCK’s rating of 50%.

Today, CCK has responded to Safaricom as per an article by the Business Daily on CCK hits back at Safaricom in voice quality test dispute. The Business Daily reports, “The CCK accused Safaricom of disowning a report that the operator played a key role in developing and doubted whether the listed telco’s assessment was in line with the law.”

So we still ask, what could be the problem between Safaricom and CCK? Me thinks it is the size of Safaricom, it’s unwillingness to comply with standards, and CCK’s core mandate of ensuring that all, big or small fishes, comply with the standards. There are rumors that CCK could be waging war against Safaricom on behalf of some individuals who have interests in frustrating Safaricom but I’ll consider them, for the purposes of this article, as rumors.

Safaricom is the biggest single company in East and Central Africa with market capitalization of over Shs. 350 billion. Safaricom alone, being the highest tax payer, pays to the government close to Shs. 8 billion in taxes (about 1% of taxes KRA collects). With over 19 million Kenyans as subscribers (almost 48% of the country’s population and 80% of market share), which is over 2 million above the 17 million subscribers that Airtel boasts of across Africa, Safaricom cannot be taken anywhere. Actually they could be the paymaster of CCK commissioners.

As big as it is, Safaricom still would want to maximize on its profitability to grow even bigger. One quick method to do this is to provide sub standard services as a cost cutting mechanism. Again, to maintain consistent quality service provision with almost the exponential growth of its subscribers, Safaricom needs to spend billions yearly on infrastructural development, something they would really want to shun. Seeing that they are so big for the government to regulate, that even if they decline to comply with the standards there is nothing really the government would immediately do, they opt for “non-compliance” as game theory states non-compliance would give them a better payoff. So Safaricom won’t comply even if CCK threatens them.

This leaves CCK with only one option, to fight Safarcom publicly hoping that this route could force Safaricom to listen. By going public, CCK could be hoping to incite Safaricom’s customers into demanding compliance from Safaricom after seeing that Safaricom is short changing them on quality standards. However Safaricom has decided to also play into the public gimmick and retort back that it is CCK’s methodology for doing the checks that is flawed. After all the ordinary subscriber cannot independently verify the quality of the services he/she receives. CCK’s approach seem not to be working as there is no mass complains about Safaricom’s poor standards.

What should CCK do? I think CCK can do heightened ads on Radio, TV, online, in newspapers, everywhere by constantly reminding the subscribers that Safaricom’s services are the poorest, that the minimum quality service a telecom company should provide is 80% but Safaricom’s is at 50%. They can also encourage subscribers to take Safaricom to court for providing below standards quality so that a judge can award all subscribers compensation for poor services to a tune of let’s say Kshs. 500 per subscriber. That would cost Safaricom over Shs. 9.5 billion and might teach Safaricom a lesson or two.

This brings me to my big question, as a country should we allow companies to grow so big that even if they break the law there is nothing as a people we can do? Is there anything the government can do to avoid this over dependency on one individual (e.g. past presidency), an institution, or a company like Safaricom? Could we enact laws that regulate competition in all sectors such that no single product/service provider has more than 50% of market share? What would such a law mean for monopolies like Kenya Power?


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