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Airtel drags regulators into Safaricom battle

4 years ago
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Airtel drags regulators into Safaricom battle

Airtel Networks Kenya, which is eyeing a bigger stake in Kenya’s telecoms industry, has accused the Competition Authority of Kenya (CAK) of allegedly ignoring market dominance by rival Safaricom.

The telco, in a petition to Parliament, also blamed the telecoms regulator 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.

“There has been no dispute as to the status of Safaricom as regards its dominance status and significant market power. However, there has been reluctance in declaring Safaricom dominant in the retail mobile market and the retail mobile money market,” Airtel said in a memorandum to the ICT committee of the Senate.

Industry data from the Communications Authority of Kenya (CA) – the telecoms regulator — shows that Safaricom held 64 per cent of the local market, more than double Airtel’s 27 per cent share, as at the year ended June. Telkom Kenya holds seven per cent of the market.

Airtel has cited eight African nations where operators had been declared market-dominant with even lower thresholds than Safaricom’s.

These include Burkina Faso that declared Airtel and Telmob dominant with shares of 39.24 per cent and 38.36 per cent respectively of the market. Congo Brazzaville declared MTN and Airtel dominant with 40 per cent and 38 per cent shares of the market while in Nigeria, MTN was declared dominant with a market share of 44 per cent.

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The Competition Act says a telecommunications firm should be declared dominant if it has a 50 per cent share of the market.

“Declaring Safaricom dominant is the first step to ensuring market competitiveness which we believe has been the sticking point and key barrier in taking any steps to rectify any market anomalies in Kenya,” Airtel said in its submissions to the Senate.

“A notion has been perpetuated that declaring Safaricom a dominant player is punishing success, which in our view is blatantly myopic.”

Airtel also told the Senate committee that there was bias in the allocation of spectrum, with Safaricom holdings 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.

The telco said CA’s failure to review the fees that mobile phone operators charge each other for interconnecting calls since 2015 has continued to favour Safaricom, which also enjoys more subscribers.

The charges commonly referred to as mobile termination rate (MTR) have remained at Sh0.99 for the past six years, prompting the intense lobbying by Airtel.

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Industry data shows that the rate has been falling gradually from a high of Sh4.42 in 2011 to the current Sh0.99, which has been in place since 2015, marking a freeze of more than five years.

A previous cut in the rate in 2010 from Sh 4.42 to Sh2.21 sparked a price war between Kenyan telecoms operators.

Analysts reckon that and Airtel and Telkom Kenya will be the main beneficiaries from a review of the mobile termination rate, along with consumers.

Revenues for the larger operator Safaricom would likely fall but the impact would be more limited for its earnings due to its high subscriber numbers.

European countries, including France, the United Kingdom, and Germany, have in recent years reviewed their MTRs downwards, leading to an increase in subscriber numbers due to low calling tariffs.

In July, the CA said that time was ripe for Kenya to review the MTR to match shifts in technology that have made mobile telephony more efficient.

The CAK has in the past defended Safaricom against claims that the telco had abused its dominance in the telecommunications sector.

CAK director-general Wang’ombe Kariuki in April told the Senate ICT committee that compliance checks on Safaricom’s M-Pesa, voice, and text services did not reveal contracts and practices that have exposed its rivals Airtel and Telkom to unfair competition.

Mr Wang’ombe added that Airtel Money and T-Kash of Telkom had over the years increased their share of money transfers and mobile subscribers due to the fair playing field in the sector.

CA data shows that M-Pesa has 98.8 per cent of the active 34.66 million active mobile money users, Airtel Money 0.78 per cent and T-Kash 0.35 per cent.

Airtel’s efforts to eat into Safaricom’s market share suffered a blow last year, after they abandoned a planned merger with Telkom Kenya, citing unacceptable conditions and delays in receiving regulatory approvals.

The CAK approved the merger on October 31, 2019, but with eight conditions including banning the would-be merged entity from selling itself to another party within five years.

The two telcos had been ordered to retain at least 349 employees in the combined business, a condition aimed at protecting their respective staff.

In addition, the merged entity was barred from transferring operating and frequency spectrum licences and required to only access the 4,204 kilometres of fibre network managed by Telkom on behalf of the government at the current market rates.

Source: businessdailyafrica
Via: norvanreports
Tags: Airtel and Telkom to unfair competition.Airtel drags regulators into Safaricom battleCompetition Authority of Kenya (CAK)frequency spectrum licences
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