M-Pesa may be forced to break away from Safaricom

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The Communications authority (CA) may compel Safaricom to hive off M-Pesa. This is among some of the recommendation made in a yet to be delivered report by Analysis Mason, International consultants tasked with finding recommendations on competition in the telecommunications market.

“The two businesses would be required to operate in separate offices, with separate staff below board level, separate branding, separate accounting and separate business operations and support system, customer support systems and management information systems,” says the report. This split will, however, fall short of separating the company into two different legal entities.

Formulation of the competition regulation in Kenya has played a key role in the outcome of the market study on telecoms. Of interest is Safaricom’s dominance with its mobile money platform MPESA. This is due to the platform’s market force and massive success as a player in the financial sector. This dominance has often been blamed for Safaricom’s ability to set tariffs independent of market forces. It is this ability that forces customers to pay higher tariffs in relation to other mobile money services providers.

Although the proposals by the consultants are still far from being implemented and will have to be discussed by stakeholders before being introduced, they are bound to raise concern in the Safaricom boardroom not only because they raise the specter of excessive regulation, but also because the proposed regulatory regime appears to target mobile money – one of the fastest growing parts of Safaricom’s business.

The report also noted a lack of competition in the Kenyan mobile money market in comparison to Tanzania. However, did not implicate Safaricom in Abuse of dominance but stated that preferential treatment given to the telecom’s partners like Commercial Bank of Africa and Kenya commercial bank (KCB) could seem uncompetitive.

To try to smooth the issues raised, the report has recommended an increase in interoperability in the financial sector by December 2017, lest MPESA be hived off into a separate company.

Safaricom through CEO, Bob Collymore has supported the idea of increased coordination in the financial sector but argued that the process should not be driven by regulation rather by market forces.

 

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Melissa Daniels
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TELECOMMUNICATION