Safaricom Will Reduce Investment If Kenya Moves on Dominance

Safaricom Will Reduce Investment If Kenya Moves on Dominance

Written by Charles Wachira | From Bloomberg News

Safaricom Ltd. will cut its planned $400 million investment in East Africa’s biggest economy this year if Kenyan regulators impose penalties on the wireless carrier to limit its market dominance, its chief executive officer said.

“If you start to slice the legs off this particular company, we’ll have to pull back on that type of investment,” CEO Bob Collymore said in an interview on Wednesday in the capital, Nairobi, following a report that a government minister had questioned Safaricom’s majority share of the telecommunications market. “We’re all up for going through the process, defining the areas that we may or may not be dominant in, defining what the abuse is, and defining what the remedies are.”

Safaricom, which is 40 percent owned by England-based Vodafone Plc, has 76 percent of the voice market in Kenya while its customers send 93 percent of all the country’s text messages, according to a report by the Communications Authority of Kenya for July to September 2014.

East Africa’s biggest company by market value also had about three quarters of mobile-money transfers — a way of making payments using mobile phones — where it faces competition from a new product by Bharti Airtel Ltd.’s Kenyan unit.

‘African Champion’

Communications Secretary Fred Matiang’i wrote to the industry regulator late last year to ask why Safaricom hadn’t been declared a dominant provider, the Daily Nation newspaper reported Feb. 17. That could lead to penalties for Safaricom such as an order to share its network with smaller competitors. Matiang’i wasn’t available when Bloomberg News called him and didn’t immediately respond to an e-mailed request for comment.

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Safaricom shares gained 1.7 percent to 15.40 shillings as of 2:52 p.m. in Nairobi on Friday, valuing the company at 617 billion shillings ($6.7 billion).

“Something that I think should concern Kenyans is this apparent arbitrary declaration of dominance, and this apparent attempt to reduce the size of what is an African champion,” Collymore said. “It’s the prudent management of the company that brings the returns that we have been bringing back to our shareholders but also to help us to invest in this company. This year we will have spent 36 billion shillings.”

Safaricom net income gained 30 percent to 14.7 billion shillings in the six months through September as revenue from data services including mobile Internet and money soared. The company has started rolling out 4G sites and plans to have 250 in place across Nairobi and Mombassa by the end of March, according to Collymore. That will enable the company to offer faster Internet and online entertainment, he said.

“Dominance in itself is not a crime,” Collymore said. “Why people keep assuming that, because you’re dominant, you’re committing a crime, I don’t know.”