Equitel, the mobile money product from Equity Bank, won a reprieve earlier this week, when rival Safaricom withdrew the increased charges it had imposed on money transfers from Equitel to its M-Pesa platform.
The rate hike, Safaricom said, would come into force on December 1, and apply to all financial institutions.
The rationale to institute the revised charges on the whole industry at the same time made sense, but the Equitel case where Safaricom could levy new charges on one specific rival at will raises troubling questions over the emerging debate on market dominance and possible abuse of the same.
Kenyan regulators, from the Competition Authority, the Communications Authority, and the Central Bank of Kenya have been kept on their toes by the fast evolving technology landscape and especially mobile money services for which no prior legislation exists.
Indeed, CBK occupies a prominent place among world regulators when it comes to the issue of financial inclusion given that it has had to pioneer regulations for the rest of the world to learn from in the area of mobile finance.
Which brings us back to the issue of Equitel versus Safaricom and the rate hike that had introduced new charges for customers transferring money from the former to M-Pesa customers.
The effect of the increase was to suddenly make Equitel to M-Pesa transfers the most expensive offering in the market and potentially one that clients would shy away from.
“We cannot rule out the increase being a retaliation to the increasing uptake of Equitel, an innovative channel to access the bank made available in partnership with our affiliate Finserve Africa Limited that is licensed by the Communications Authority,” Equity CEO James Mwangi protested.
Safaricom responded that it was acting to stem rising cases of reported fraud involving use of the M-Pesa channel to transact to third parties such as when I access my bank account and transfer money to another person’s M-Pesa account.
For the CBK, two issues must remain central to its thinking.
One, what best promotes financial inclusion in the country? This question it seems to have answered having licensed and defended the use of Equitel’s thin SIM overlay technology that Safaricom opposed.
Two, is there an issue of dominance or abuse of dominance by Safaricom that should raise anti-competition concerns?
Airtel, a rival telco to Safaricom, has already threatened to quit the Kenyan market citing Safaricom’s dominance.
CBK and the two CAs (Communications Authority and Competition Authority) seem undecided over what constitutes dominance in the market.
But lucky for them, precedence exists in the world for determining such matters.
For starters according to online reference Wikipedia, a company whose product has over 60 per cent of the total market share is seen as having market dominance and is likely to raise anti-competitive concerns with the government.
Safaricom in most of its business categories save for fixed Internet enjoys well over 70 per cent market share with only voice coming in at 67 per cent, according to the CA’s sector statistics.
The dominance is more in the mobile money sector where out of 26 million registered mobile money users, 20 million or 76 per cent are M-Pesa customers.
The second issue to consider is what might constitute abuse of dominance or anti-competitive behaviour.
The most famous anti-competition law in the world, is the American Sherman Anti-Trust Act of 1890 authored by Senator John Sherman and others.
“The purpose of the [Sherman] Act is not to protect businesses from the working of the market; it is to protect the public from the failure of the market. The law directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself.”
Famous victims include tycoon JP Morgan’s businesses, the breakup of John D. Rockefeller’s Standard Oil into 33 different entities including today’s ExxonMobil, the breakup of AT&T into eight companies and the near breakup of Microsoft for abuse of its Windows platform dominance to lock out competing software makers.
Others like American Sugar with command of 98 per cent of the sugar refining industry in the US escaped being labelled monopolies because they were deemed not to restrict trade despite their market dominance.
It is within this kind of thinking that Kenyan regulators need to apply themselves when considering the issue of Safaricom and whether it is dominant and abusing that dominance.
Clearly, Safaricom cannot be punished for innovation and enterprise in building a formidable and globally recognized platform in M-Pesa, but at the same time, its implementation of this platform should not be to the detriment of other would be innovators.
Mbugua is a communications consultant and comments on topical issues.