NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, March 8, 2017

Safaricom Ltd, East Africa’s biggest mobile-phone 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 Plc said.

The company 40 percent owned by Newbury, England-based Vodafone was found to be Kenya’s dominant carrier in a draft report by U.K.-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 mobile-money platform known as M-Pesa to transfers from competitors’ services at prices determined by the regulator. Separately, Kenyan opposition lawmaker Jakoyo Midiwo is also proposing a law to force a Safaricom split, a plan that Chief Executive Officer Bob Collymore has called “plain stupid.”

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

“If you say it’s a 100 percent subsidiary of Safaricom, the M-Pesa Company has to buy services from Safaricom because of the tax implication; value added tax, inter-company taxes, Competition Authority regulations,” Joseph said in a phone interview Monday. “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.”