Is Communications Authority running out of options?

Declare dominance, but do not punish success.

This has been Safaricom’s rallying call each time the Communications Authority attempts to intervene in the Kenyan telco sector that has been dominated by Safaricom in the better part of the last decade

Safaricom, with its flagship product MPESA, has without doubt transformed lives and put Kenya on the global map where financial and digital inclusion is concerned.


So why would anybody, particularly the regulator, want to slow down Safaricom and take away its shine under the guise of promoting competition?

This seems to be Safaricom’s view each time the regulator attempts to correct what is obviously a market failure within the sector.

A market failure is said to have occurred when there is no effective competition, there are high barriers to entry or there are inadequate laws to deal with market failure.

In the case of Kenya, lack of effective competition seems to be the issue, with Safaricom’s competitors always getting the brunt of its superior marketing, entrenched product scope and wider geographic reach across the country.

Indeed Safaricom has no apologies to make for this since they have invested heavily in infrastructure across the country and have every right to reap the benefits.

But beneath this reality is the stubborn fact that for better or worse, the Kenyan economy is powered by Safaricom or MPESA, its money transfer service.

MPESA SUCCESS The latest regulatory reports show that during the last quarter, of the close to two trillion Kenya Shillings exchanged over mobile money platforms, more than 77 percent was transacted by Safaricom’s MPESA.This maybe great business for the Safaricom shareholders, but it remains a risky business for a whole economy of a nation to be dependent on the success or otherwise of a single multinational.In other words, the spectacular success of Safaricom is simultaneously and potentially a single point of failure for the Kenyan economy.Perhaps this is the perspective the regulator is taking, rather than one of intending to punish an otherwise successful company. However, the regulatory options for managing this single point of failure seems to be drying up over the years. MOBILE NUMBER PORTABILITY Initially, the regulator introduced something called mobile number portability, where subscribers could move to competing telco providers while retaining their regular or original mobile number.Basically this reduces the switching costs a subscriber incurs. However, number portability was and remains a massive failure, with less than five hundred subscribers out […]

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