(Bloomberg) -- Telkom Kenya Ltd. is pushing the country's telecommunications regulator to implement rules that will restrict the dominance of East Africa's biggest company, Safaricom Ltd., and subject it to price controls.
“The regulation for a dominant operator already exists,” Telkom Kenya Chief Executive Officer Aldo Mareuse said in an interview on Friday in the capital, Nairobi. “It's just a matter of implementing it, and that is my biggest focus: to have it implemented as soon as possible because otherwise it just endangers the industry.”
A draft report on behalf of the Communications Authority released in March said that Safaricom is so dominant in the mobile-money and mobile-communications sectors that steps need to be taken to improve competition or the company should be broken up. The operator has criticized proposals first mooted in June 2015 to split the company as ill-advised, while the government has said it is opposed to measures that would stifle innovation.
“The fact that it is taking so long is a bit worrying,” Mareuse said.
Safaricom had a 72 percent market share at the end of March, according to the Communications Authority. Its closest rival is the local unit of Bharti Airtel Ltd., with 16 percent, while Telkom Kenya has 7.2 percent. Safaricom's M-Pesa mobile-money transfer processed 891 billion shillings ($8.6 billion) of transactions in the first quarter this year, at least 76 percent of the country's total.
Price Controls
Telkom Kenya, 70 percent held by private-equity firm Helios Investment Partners LLP, expects that declaring Safaricom dominant will also compel its rival to seek regulatory approval on pricing for its products.
Safaricom is able to give discounts to customers who call each other on its network, or bundle products together at prices that Telkom Kenya is unable to compete against, Mareuse said.
“This is what needs to be regulated,” he said. “It's very easy to provide very cheap on-network pricing when you have 70 percent of the market. It has no impact when you have 7 percent of the market.”
The push for price controls is “retrogressive” in a liberalized economy because it will make the products more expensive to customers, Safaricom CEO Bob Collymore said in emailed response to questions on Tuesday. “This is unacceptable and self-serving. They should focus on providing competitive services to customers as opposed to seeking help from the regulator in a competitive environment where customers are free to decide the service and supplier of their choice.”
Ready to Fight
Kenya plans to introduce mobile-money interoperability by the end of July which will allow subscribers to send money across the different mobile-phone networks. While the operators have a temporary agreement on network sharing, Telkom Kenya wants the regulator to determine the pricing for network sharing so it is profitable for all the companies involved.
Companies are in the process of finalizing technical and contractual aspects on mobile-money interoperability, according to Collymore. “It is therefore surprising that after this progress, any operator would want the regulator to intervene so that it can make a profit.”
Safaricom is prepared to “fight” against being compelled to share infrastructure at regulated prices, he said last month.
The Nairobi-based company plans to expand M-Pesa, which means mobile money in Swahili, into new markets such as Nigeria and Angola after Vodafone Group Plc sold its 35 percent stake in Safaricom to its Johannesburg-based Vodacom Group Ltd. unit.
Telkom Kenya, which has rolled out 4G in 28 of Kenya's 47 counties, plans to shut down its mobile-money unit on July 4 and restart the service after a revamp, Mareuse said, declining to comment on when it will be relaunched.
The company, which bought out Paris-based Orange SA a year ago, sees a “huge opportunity” in broadband, where penetration amounts to 30 percent of the market, he said. It is interested in making acquisitions in broadband and financial technology after about a year.
“There are obvious acquisitions in the enterprise market where we would be able to control more of the value chain,” Mareuse said. “Obviously it's a game of scalability so anything that provides value, we will look at.”
To contact the reporter on this story: Bella Genga in Nairobi at bgenga2@bloomberg.net.
To contact the editors responsible for this story: Paul Richardson at pmrichardson@bloomberg.net, Vernon Wessels, John Bowker, Ana Monteiro.
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