Fresh Push Signals Break-Up Of Kenya’s Safaricom & M-Pesa Is Near
Speculation around the splitting of Kenya and East Africa’s dominant telco, Safaricom, has been mooted on and off over the last six years. Members of the Kenyan parliament have put in some effort in the past to effect the separation of the hugely successful mobile money platform, M-Pesa, from the telecommunications business, citing competition and monopoly implications – albeit to no avail.
However, some recent developments suggest there might be change on the way, and perhaps imminently. Safaricom will reportedly spin off its overwhelmingly dominant M-Pesa platform as a separate entity in the coming months, per local reporting citing Central Bank of Kenya (CBK) Governor Patrick Njoroge as revealing that the split could happen “as soon as January 2023.”
If the move goes ahead, a holding company will apparently manage Safaricom’s mobile money services, towers, data services, and its Ethiopian arm. It could end years of controversy surrounding the observed mobile money market dominance of Safaricom in Kenya.
Talks of divvying up Safaricom previously gathered interest when the Kenyan parliament stepped up calls to break the all-conquering telco into two fragments. This attempt sought to guard against monopoly in the Kenyan telecommunications space. But as time passed, the matter grew cold.
Once again, in 2017, a UK-based consulting firm, Analysys Mason (AM) was contracted to carry out a study on competition in the telecommunications market in Kenya. Analysys Mason’s leaked report made certain recommendations to the Kenyan government.
The recommendation advised the splitting of Safaricom. That is, the separation of Safaricom’s telecommunications business from its indomitable mobile money service, M-Pesa, which has a 99 percent market share. However, this recommendation was later abandoned, and once again, the matter was shelved.
In November 2020, talks of dismantling Safaricom came up once more. As with the two previous instances, there have been several back-and-forths on the matter. Nevertheless, the matter received some treatment as a few members of parliament pushed for a split once again.
This would mean that the telco arm and the mobile money arm would operate separately. Hence, each would exist as a stand-alone venture and would have different regulators and overseers.
Lawmakers in Kenya have labelled Safaricom as a dominant market operator and have called for its separation from M-Pesa. This action is said to be in an effort to check the ever-increasing dominance of Safaricom in the telecommunication space.
“In Kenya, you have a situation where one single player dictates how much you are going to pay for data bundles, for calls and Short Message Service because it controls almost 90 percent of the market,” Irungu Kang’ata, now a serving Governor, has said in the past during his time at the senate.
M-Pesa processed USD 340 B in the twelve months to 30 June 2022, a 20.2 percent increase, and it accounts for half of Safaricom’s profit. Also, nearly 65 percent of Kenya’s telecom market share is commanded by the telco.
The lawmakers’ efforts at breaking up the company have been conveyed with the message of achieving a more competitive atmosphere for other players in the industry to grow and thrive.
If this move pulls through, it means that Safaricom’s voice and data unit would now be under the regulation of the Communications Authority of Kenya (CAK) while M-Pesa would be under the control of the Central Bank of Kenya (CBK), just like banks and fintech companies.
Not only does Safaricom have the largest market share in Kenya (both telecoms and mobile money), but it also has the best telecom infrastructure.
This forces even its competitors, Telkom Kenya and Airtel Kenya, to host their networks using Safaricom’s masts since it enables them to reach more areas. Due to this, both Airtel Kenya and Telkom Kenya are known to be deeply indebted to Safaricom with the debt running into millions.
Safaricom has argued against the split in the past, reiterating that the company was being punished for its immense success but current CEO, Peter Ndegwa, has hinted publicly of late that a split is in the company’s future. The Kenyan government, which owns a reported 35 percent stake in Safaricom, has also reportedly shown stiff resistance against suggestions of a split.
The CBK has, however, taken a different stance. In March, the apex bank increased pressure on Safaricom and other service providers to separate their mobile money businesses, ostensibly to “improve regulation and consumer protection.”
Since that time, Airtel Kenya has separated its mobile money business, Airtel Money, from its other services while Telkom Kenya is understood to be weighing up a similar move.
Feature Image Credits: Cointelegraph
