How change of engines at Telkom and success of Equitel could kill dominance debate

NAIROBI, KENYA: As Kenya waits for the publication of the controversial report on market dominance by the Communications Authority of Kenya (CAK), latest data from the Telecoms regulator shows that rivals can eat into Safaricom’s market share.

The total mobile subscriptions recorded by Telkom Kenya jumped by 18.5 per cent to stand at 3.4 million from 2.8 million reported in the previous period, according to the first quarter report covering July and September 2017.

This means Telkom Kenya was able to increase its customer numbers by 600,000 new subscribers in three months.

“This is attributed to the customer acquisition campaign carried out by the service provider following its rebranding in mid-year,” the report by the Communication Authority of Kenya (CA), says in part. This saw the market share of Telkom, which recently rebranded after changing ownership, grow by 1.2 percentage points to stand at 8.4 per cent from 7.2 per cent recorded last quarter.

Another player making inroads in the mobile market is Finserve Africa Ltd, which registered a market share of 4.7 per cent up from 4.6 per cent.

Mobile Pay Ltd and Sema Mobile Services market shares stood at 0.2 per cent and 0.0 per cent respectively.

“Mobile Pay Ltd reported a total of 88,853 subscriptions during the period up from 87,786 subscriptions recorded in the previous period.

Sema Mobile Services subscriptions remain unchanged at 263,” the report says.

Safaricom lost 0.7 percentage points to record a market share of 71.9 per cent in mobile subscriptions during the period under review - from 72.6 per cent registered during the previous period despite adding about 200,000 new subscribers on its network in the period.

Airtel Networks which has been struggling to remain afloat saw its market share stand at 14.9 per cent during the period under review, down from last quarter’s 15.3 per cent.

On the mobile money front, Equity Bank’s Equitel appears to be getting a footing after its users transacted Sh322 billion in the period. This is nearly a quarter of what M-Pesa moved - having transacted Sh1.3 trillion in the period under review.

Airtel Money

M-Pesa services posted a market share of 80.8 per cent during the quarter under review.

Equitel Money posted a market share of 6.8 per cent while Mobikash stood at 6.3 per cent. Airtel Money and Mobile Pay Ltd attained 5.8 and 0.3 per cent market shares respectively.

Though it had been written off at the beginning, given its slow uptake, the growing traction by Equity Bank into the mobile phone space, hosted on Airtel’s infrastructure, appears to be building some muscle to wrestle Safaricom’s M-Pesa which has been around for 11 years.

It also comes at a time when banks are pushing their own mobile money transfer service, Pesalink, which may also dent Safaricom’s hold on the market.

The dominance debate, which is expected to be settled once the regulator releases its report, continues to generate tension in the industry. At some point, Airtel threatened to exit the Kenyan market over what it termed as market dominance.

CA commissioned the report on competition in the ICT sector last year but has not yet finalised it since it is still engaging stakeholders The main challenges for Airtel, which stands to be one of the biggest beneficiaries should the final report carry the same conclusions as the draft, stem from its inability to aggressively invest and remain ahead of the curve in the market. Its trouble began when it stuck to the per minute billing long before the train had left the station.

But the innovation of M-Pesa boosted Safaricom’s market penetration in the market, that also helped it survive a brutal price war launched by Airtel to dislodge Safaricom from the market.

Though price war strategy worked in other markets in Africa, it could not be sustained in Kenya, hurting its efforts to turn around its fortunes.

But its partnership with Equity Bank appears to be bearing some fruits at last and could offer it the much needed muscle to survive in the market.

Its survival in the market was further boosted recently by the High Court after which stopped the regulator from demanding Sh2 billion licence fees.

Safaricom has fought efforts to declare it dominant for more than year, as rivals wait on the wings for an opportunity to cash in on such a declaration.

The firm has said on several occasions that it does not believe dominance in itself is a crime.

It argues that it cannot be blamed for inefficiencies of its rivals, especially even as it maintains that it has never abused its dominant position.

Safaricom attributes its success to heavy investment that runs to over Sh30 billion or about 15 per cent of its revenue in its infrastructure and in improving its services in a bid to meet customer needs.

The firm says the investment has seen it increase its population coverage on 2G to 96 per cent and 4G coverage from 25 per cent to 32 per cent.

“Investment is spread across various part of the network and is intended to provide better coverage and better quality,” Safaricom Chief Finance Officer Sateesh Kamath said at an investor briefing.

He says that a significant portion of its capital expenditure also goes towards better Information technology systems in its bid to serve its customers better.

“Safaricom’s capex intensity is higher than benchmark rates of most of the global Telcos of scale. We believe our commercial success is driven by strong customer centric actions which include investing ahead of the competition to bring the latest technologies for our customers at affordable prices,” Kamath said.