Safaricom faces petition to lower M-Pesa charges

Telkom Kenya is seeking regulatory orders through Parliament to compel Safaricom to cut the fees it charges on its mobile money service M-Pesa for cash transfers to rival platforms.

The country’s largest telco currently has cheaper rates for transactions among its customers compared to those charged on cross-platform deals, which rival operators reckon is uncompetitive behaviour.

The proposal is among many that have been put forward to the Senate Standing Committee on Information, Communication and Technology by Safaricom’s rivals which argue that the company is dominant and must be reined in to stave off the collapse of competitors.

Charges for transferring cash from M-Pesa to customers of rival mobile money platforms – described as “unregistered users” — can be more than four times higher than fees among Safaricom’s customers.

Telkom submitted that the use of different tariffs has served to entrench the dominance of M-Pesa – which has more than 90 percent share of the mobile money market — and left rival platforms like Airtel Money and T-Kash with no chance of catching up.

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“Safaricom charges should be uniform for cross-platform money transfers, in line with the AM recommendation, on both USSD [SMS-based technology] and STK [SIM card-enabled] transfers,” Telkom Kenya said in its submission.

The company says Safaricom’s pricing strategy has helped it to attract more customers and lock them in with little incentive to use alternative platforms, perpetuating the so-called club effect.

An M-Pesa customer transferring Sh1,000 to another person on the same platform pays a fee of Sh12 or 75.5 percent less than the Sh49 it costs to remit the same value to a recipient on a rival platform.

Transferring Sh10,000 from M-Pesa to a different mobile money platform costs Sh205 or 2.3 times the fee on transactions among Safaricom customers.

M-Pesa customers can send each other up to Sh150,000 in a single transaction but the highest value that can be remitted to another platform is capped at Sh35,000.

Besides ending what it terms discriminatory pricing, Telkom Kenya also wants additional measures to be taken by regulators to reform Safaricom’s mobile money business.

“The relevant regulators, Central Bank of Kenya (CBK), Communications Authority of Kenya (CA) and Competition Authority of Kenya (CAK) need to co-operate and co-ordinate the implementation and enforcement of agent interoperability,” the telco said.

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“The CBK should set a firm deadline for full mobile money interoperability and impose financial incentives designed to ensure Safaricom co-operates in implementing agent interoperability by the specified deadline.”

The company added that CBK needs to implement merchant and biller interoperability as well as agency interoperability. It also wants Safaricom to be broken up into separate units offering mobile money and telecommunications services.

Telkom Kenya argues that Safaricom’s dominance across voice, mobile money and other services is so severe that regulators need to take action to forestall the collapse or exit of rivals.

“Accordingly, application of competition law alone would not adequately address the market failure(s) concerned,” the company said.

Safaricom, in its submissions to the same committee, defended itself against charges that it is a dominant player using its outsize market power to the detriment of rivals.

The company said there was healthy competition in the industry and that any player could build its market share through increased investments and innovation.

“Safaricom does not have any market power and therefore Safaricom cannot act independently of other players and consumers,” the firm’s chief executive, Peter Ndegwa, told the committee.

“It is our position that there should be no adverse regulatory actions that would stifle the growth the industry. There is room for great investment in the industry and we look forward to seeing additional investment by other players into the market.”

The submission came days after Airtel told the same committee that local regulators had been reluctant to declare Safaricom a dominant player despite having a market share of more than 50 percent, a threshold that has triggered such designations in other markets.

The CAK and the CA have said that Safaricom’s market share has declined in recent years and that competition remains healthy, a position the telco reiterated to the committee.

Airtel has argued that declaring Safaricom a dominant player is the first step to addressing the alleged uneven operating environment.

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The second-largest telco also blamed the CA for skewed allocation of mobile spectrum in favour of Safaricom and failure to reduce the fees that mobile phone operators charge each other for interconnecting calls.

Airtel also told the Senate committee that there was bias in the allocation of spectrum, with Safaricom holding much more than its rivals.

“Despite investing heavily in the network to improve customer experience, we continue to grapple with lack of spectrum especially in 4G/LTE which, as advised by the CA, is unavailable, yet the dominant player holds excessive spectrum,” Airtel said.

Airtel’s petition to Parliament shows that it has been allocated 50 MHz of the spectrum compared to 82.5 MHz for Safaricom and 37.5 MHz for Telkom Kenya.

Safaricom’s submission did not address the claim of hogging spectrum but emphasised its huge investment in infrastructure and payment of the largest corporate taxes in the country.

While Airtel has stressed the reasons why Safaricom should be declared a dominant player and remedial actions taken, Telkom Kenya argues that the smaller players are in such dire straits that the issue should go beyond mere competition laws and be tackled by proactive regulation.

“Although applied on a limited basis, ex-ante regulation has a long-term impact on competitiveness of the sector by foreclosing exits, attracting new entrants and spurring investments by all,” Telkom Kenya said.

“Put simply, ex-ante regulation demands short-term sacrifices by firms in the market for the overall consumer and economic welfare.”

About Author: samuel musila

Founder, TechKnow Africa . Co-Founder : Zillah Technologies LTD. Software Developer and Cyber Security Expert. Passionate about African Technology Innovations and Inventions.

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