Vodafone: call to split M-Pesa is ridiculous

Safaricom, East Africa’s biggest cellphone company, would have to reconsider future investment in Kenya if proposals to break up the company are implemented, the head of mobile money at parent Vodafone said.

The company, 40%-owned by Newbury, England-based Vodafone, was found to be Kenya’s dominant carrier in a draft report by UK-based advisory group Analysys Mason.

The study was commissioned by the Communications Authority of Kenya to check whether the market leader had abused its position.

The report recommends Safaricom opens up its mobilemoney platform known as M-Pesa to transfers from competitors’ services at prices determined by the regulator. Separately, Kenyan opposition MP Jakoyo Midiwo is also proposing a law to force a Safaricom split, a plan that CEO Bob Collymore has called “plain stupid”.

The proposal was “inconceivable thinking”, said Michael Joseph, Vodafone’s director of mobile money, who founded the decade-old service when he was Safaricom’s CEO.

“If you have to make these investments and everybody benefits, including your competitors, you probably won’t make that investment, you’ll think very carefully about them,” Joseph said.

Depending on how the split was executed, M-Pesa might have to buy services such as Unstructured Supplementary Service Data from its parent at market rates, which would push up the cost of making transfers, Joseph said.

“The whole idea that you want to split a company up because it is successful to me is just completely ridiculous,” he said, referring to the MP’s proposal to break up the company.

“You are punishing success. Why would you do that?”

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Analysys Mason has declined to comment on its report, which is yet to be finalised. The communications authority, which regulates the industry, said last week it was reviewing the report before releasing it.

SAFARICOM IS KENYA’S BIGGEST MOBILE PROVIDER WITH A 69% MARKET SHARE, ACCORDING TO THE REGULATOR

Safaricom is Kenya’s biggest mobile provider with a 69% market share, according to the regulator’s statistics.

Its closest rival is the national unit of Bharti Airtel, with 17.5%, while it also competes with Helios Investment Partners-owned Telkom Kenya.

The Kenyan government did not support regulation that stifled competition or forced companies to split based on their innovation, Information, Communications and Technology Secretary Joe Mucheru said last week.