July 7, 2015
The Kenyan mobile money transfer business is witnessing a turf war between the country’s largest telecom service providers, Vodafone-backed Safaricom and Airtel. At the centre of this fight is m-pesa, a mobile phone-based money transfer and microfinancing service by Safaricom. The government of Kenya is considering regulations in an effort to protect the market against monopoly, which Safaricom has been accused of by Airtel and other smaller players in the market.
Safaricom currently has a share of more than 60% of Kenya’s 33 million mobile users. Out of the 26 million mobile money users in Kenya, m-pesa has 20 million customers. The mobile money transfer business is bustling in Kenya. According to reports by Safaricom, transactions valued at 87% of Kenya’s GDP passed through m-pesa last year. Mobile money also constitutes a very big part of Safaricom’s annual revenues which grossed $333.73 million over the last year, largely through fees. In May, the company announced $320 million in annual profit, which is up 38% from last year. While voice still remained the leading source of income for the company, m-pesa rang in a 23% growth with data seeing a 59% increase. Of the three players in the segment (Telkom Kenya, Airtel and Safaricom), only Safaricom has constantly reported profits.
Following anti-competition and monopoly complaints by other players in the market, the Communication Authority of Kenya (CAK) mandated Safaricom to allow its mobile money agents to also host services from other operators last year, a practice which until then had been refused by them. Airtel has been fighting to share mobile phone cash transfer agents. The 20 million m-pesa customers have been netted via the 83,000 agents that Safaricom engages through the country. This vast network makes it easy for subscribers to deposit and withdraw cash.
Besides that, Airtel’s main grouse against Safaricom has been the interoperability costs across networks, which Airtel wants regulated. Currently, Airtel—which is the second largest operator after Safaricom and Equity Group—allows its customers to send money to each other across their network operators for free. However, mobile cash transfers from m-pesa to Airtel Money are charged at double the price of transactions compared to those between Safaricom subscribers. Airtel says that such practises are leading to barriers for other operators in the business.
In a case filed with CAK, Airtel has asked for Safaricom’s pricing of m-pesa services to be investigated, as it suspects them to be anti-competition. It also wants the Central Bank of Kenya to issue a ceiling tariff on what operators can charge for sending money across networks. If the new regulation is passed by the Kenyan parliament, Safaricom will have to separate its mobile money business from its voice & data services and infrastructure business, leading to a weaker spot in the market. In addition, it will also have to overcome the slowly growing competition from Equity Group which has reported 650,000 subscriptions and also Tangaza which has reported half a million subscriptions. For now, it’s a wait-and-watch game for telecom players in the Kenyan market as the parliament and regulatory authorities debate their next move for anti-dominance while Safaricom makes every effort to fight them.