[kictanet] Safaricom faces M-Pesa break up in market dominance war

Fri Mar 3 16:20:54 EAT 2017

Hi Victor and listers,

Based on the questions you raise, allow us to draw the distinction and points of convergence on the roles of CA and CAK with respect to powers over competition matters and on dominance declaration.

Powers over competition matters

It is important to note that both institutions have powers over competition matters in the ICT sector.  The Communication Authority has both ex-ante and ex-post jurisdiction while the Competition Authority has only ex-post jurisdiction. Ex ante regulation is the setting of rules and obligations to be adhered to by service providers (before the event) deemed to be in a position of significant market power which, either in itself or through possible abuse of such a position, may impair competition to the detriment of consumer welfare. Examples of ex ante rules that are focussed on wholesale services  such as interconnection (applicable to all networks), access to USSD channel ( applicable to mobile money platforms) etc, where each network is deemed to have monopoly over its own network when terminating calls from, or providing access to other networks.The philosophy behind  Ex post regulation punishes abuse of dominance. The telecommunications and the ICT sector in general applies both forms of regulation.

The Communication Authority's powers in relation to competition are derived from the Kenya Information and Communications Act 1998(as amended in 2013 and 2015) (KICA). These powers include:

i.      the promotion of competition (section 23(2)(b))

ii.     ex-ante and ex-post jurisdiction (sections 84Q, 84R, 84S and 84T)

iii.   determining which licensees are “dominant in a relevant market” (section 84W).
On the other hand, the Competition Authority derives its mandate from the Competition Act, 2010 (with the 2012 and 2014 amendments) (Competition Act). These powers include:

i.      ex-post (with some powers in relation to market inquiries)

ii.     to investigate complaints and markets to establish if there has been an abuse of dominance or anti-competitive behaviour (including restrictive trade practices) (Parts III, IV and V of the Competition Act)

Definition of Dominance

Notably, the definition of a dominant operator in both Kenya Information and Communication Act and Competition Act is similar.

The Competition Act defines  a dominant position as follows:

S4(3) of the Act:

A person has a dominant position in a market if the person –

(a) produces, supplies, distributes or otherwise controls not less than one-half of the total goods of any description that are produced, supplied or distributed in Kenya or any substantial part thereof; or

(b) provides or otherwise controls not less than one-half of the services that are rendered in Kenya or any substantial part thereof.”

In the 2015 amendment of KICA the definition of “dominant telecommunications provider” cross-references s4 and 23 of the Competition Act i.e. A person has a dominant position in a market if the person –

(a) produces, supplies, distributes or otherwise controls not less than one-half of the total goods of any description that are produced, supplied or distributed in Kenya or any substantial part thereof; or

(b) provides or otherwise controls not less than one-half of the services that are rendered in Kenya or any substantial part thereof

Power over Dominance

On matters of dominance, KICA confers the CA with primary decision-making powers in this regard. Particularly, s84W  “The Commission may, in consultation with the Competition Authority of Kenya and after due process, declare a person or institution by notice in the Gazette, to be a “dominant telecommunications service provider” for the purposes of this Act”.

Moreover, the Fair Competition and Equality of Treatment Regulations, 2010 expounds more on how the Authority will go about the process of declaration of dominance. For the avoidance of doubt, the Kenya constitution 2010, envisaged the creation of an independent regulator,free from both commercial and political interests; and which the Supreme Court re-affirmed that that envisaged independent regulator is the CA.

I hope that sheds some light that can inform discussions.

Regards,

Rachel

From: kictanet <kictanet-bounces+alwala=ca.go.ke at lists.kictanet.or.ke<mailto:kictanet-bounces+alwala=ca.go.ke at lists.kictanet.or.ke>> on behalf of KICTAnet Discussions <kictanet at lists.kictanet.or.ke<mailto:kictanet at lists.kictanet.or.ke>>
Reply-To: KICTAnet Discussions <kictanet at lists.kictanet.or.ke<mailto:kictanet at lists.kictanet.or.ke>>
Date: Friday, February 24, 2017 at 1:41 PM
To: Rachel <alwala at ca.go.ke<mailto:alwala at ca.go.ke>>
Cc: 'Victor Kapiyo' <vkapiyo at gmail.com<mailto:vkapiyo at gmail.com>>
Subject: Re: [kictanet] Safaricom faces M-Pesa break up in market dominance war

I would be interested to understand from CA, the role of the Competition Authority in this discussion vis its mandate under the Competition Act,2010, and why the Communications Authority continues to have a role on matters competition. IMO, I think it would be prudent to have the Competition Authority take the lead on this question given its mandate under the law.

Victor Kapiyo

Advocate of the High Court of Kenya & Commissioner for Oaths
Suite No. 8, Centro House, Westlands, Nairobi
Office Tel: 020 440 4410; Cell: 0721 847 178
====================================================
“Your attitude, not your aptitude, will determine your altitude” Zig Ziglar

On 23 February 2017 at 23:55, Gabriel via kictanet <kictanet at lists.kictanet.or.ke<mailto:kictanet at lists.kictanet.or.ke>> wrote:
Guys,
Competition Authority refused to be involved in matters between Safcom and the regulator.
Back in 2015, CAK, wrote to CA and and asked if Safcom had abused their position.
From DG of CA, to CS Matiang'i and the then PS Tiampati, no one was able to reply to that question.
Read below;
http://www.businessdailyafrica.com/Corporate-News/Reprieve-Safaricom-CAK-refutes-dominant-player-tag/539550-2650002-un4mtj/index.html

So if you look at the grand scheme of things splitting Safcom is going to be done so as to create room to expedite growth room for another player who I will NOT name now. But look very closely. I mean very closely ....

Get Outlook for iOS<https://aka.ms/o0ukef>

________________________________
From: kictanet <kictanet-bounces+gwarigi=msn.com at lists.kictanet.or.ke<mailto:msn.com at lists.kictanet.or.ke>> on behalf of Grace Githaiga via kictanet <kictanet at lists.kictanet.or.ke<mailto:kictanet at lists.kictanet.or.ke>>
Sent: Thursday, February 23, 2017 5:01:44 PM
To: gwarigi at msn.com<mailto:gwarigi at msn.com>
Cc: Grace Githaiga
Subject: Re: [kictanet] Safaricom faces M-Pesa break up in market dominance war

The thing is that report is already 'leaked' or how else would Jaindi be chambuaring it for us. So it will be interesting to see the final report that is 'undergoing internal review'. And I guess we can interpret this 'reviewing' in different ways. But you also raise a good point. What were the TORs? Was Safaricom already declared dominant and therefore these specific recommendations? Did the Consultant draw these recommendations based on opinions from some quarters?

Look at this from the article:"The report has also recommended ‘replicability of retail tariffs’ meaning that whenever Safaricom is deciding a promotion or a loyalty scheme - for instance ‘Bonga points’ or ‘Storo’ - the regulator must check and ensure that the offer is being profitably replicated by a reasonably efficient competitor". Really? So Companies have no independence in deciding on their promotional products to attract more customers?

In addition,  I thought we have a Competition Authority that should deal with competition matters? Yes?

Wacha tungonjee hiyo ripoti after it has been 'reviewed'.

Best regards

Githaiga, Grace

On Thursday, 23-02-2017 at 16:21 Ali Hussein wrote:

GG and all

I'm really curious:-

1. 

This document seemedvery loaded. And it seems that it has gone beyond its mandate? Were theConsultants asked to provide recommendations to remedy a 'Dominant' position?it would be good if we could have seen the TOR for this assignment.

To quote the article:-

2. 

Safaricom chief executive Bob Collymore said he had not seenthereport, but bristled at the prospect of an external party ordering thecompany to break up its business.

“I am pretty hostile to the idea. Wecan’t have other people dictating whether we break up our company or not,” hesaid.

Absolutely. I can't blame him for that.

It also seems like the Regulator is Regulating Safaricom for thecompetition not for the consumer

 - if of course the leaked report is to be believed.

Then the leaked document talks about the possibility of splitting M-Pesa from Safaricom but stopping shot of making the split permanent - as in split them but let them remain under one legal entity. In commercial terms this is known as creating 'Chinese Walls'. We all know how that works.

IT NEVER WORKS!!

Besides which. Breaking up companies is simply a Regulatory tool fit for the AT&Ts, Standard Oils (which by the way is back as one huge conglomerate after being split into more than 50 companies) of this world.

3. This is the information age. The Networked Age, The Millenial Age. The core potential customers don't care about Nationality, colour, creed or whatever else. All they care about is What have you done for me lately? or better still - What can you do for me now?

Its clear Safaricom has earned its strips. Remedying market power abuse cannot be to split up the company. The idea that you punish a successful company by cutting it into pieces is preposterous in 2017.

4. CA, we would like to see the report before 'internal' review. We would like to see it before it is edited. This is the age of transparency. We would hope that the report we finally see as the community will look the same as the one Jaindi Kisero seems to be privy to.

Share the report already...

AliHussein

Principal

Hussein & Associates

Tel: +254 713 601113

Twitter: @AliHKassim

Skype: abu-jomo

LinkedIn: http://ke.linkedin.com/in/alihkassim

13th Floor , Delta Towers, Oracle Wing,

Chiromo Road, Westlands,

Nairobi, Kenya.

Any information of a personal nature expressed in this email are purely mine and do not necessarily reflect the official positions of the organizations that I work with.

On Thu, Feb 23, 2017 at 1:32 PM, Grace Githaiga via kictanet <kictanet at lists.kictanet.or.ke> wrote:

As the draft Dominance report undergoes internal review at CA, Jaindi Kisero continues to provide some snapshots.

"Telecoms operator Safaricom could be forced to hive off its popular mobile money service M-Pesa if sector regulator, the CA, moves to implement recommendations of a market dominance report.

Separating the highly profitable mobile money service from Safaricom’s core telecoms business – commonly referred to as functional separation - is the gist of a raft of recommendations that international consultants
- Analysys Mason - have made in a yet-to be published reportseen by the Business Daily."

More details:http://www.nation.co.ke/business/Safaricom-faces-M-Pesa-break-up-in-market-dominance-war-/996-3824618-vdv5gw/index.html

Best regards

Githaiga, Grace

Co-Convenor
Kenya ICT Action Network (KICTANet)
Twitter:@ggithaiga
Tel: 254722701495
Skype: gracegithaiga
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