Thursday’s changes to the board of directors of telecommunications giant, Safaricom, are being seen as some of the strategic moves it is taking to fight off attempts to split it up on grounds of dominance.
Of particular interest was the naming of former Information and Communications Permanent Secretary Dr Bitange Ndemo as an independent board member.
Dr Ndemo, who served during the tenure of former President Mwai Kibaki, was at the core of the many government-initiated ICT ventures that resulted in major transformations in the sector.
But more importantly, he is at home with the regulatory thinking within government and is thus better place to guide Safaricom on how to navigate the many roadblocks being put on its ascendancy path, including the proposal to split the multi-billion shilling-minting Mpesa from the giant telco.
There have been mixed reactions to a draft report by Analysys Mason, a UK consultancy, which made the proposal among a raft of other recommendations after determining that Safaricom has an 80 per cent market share in mobile communications and mobile money markets, a situation that disadvantages its struggling rivals, Airtel and Orange Telkom.
According to the study, which commissioned in May last year by the Communications Authority of Kenya (CA), there is also need for a system where Safaricom charges the same fees for money transfers to registered and unregistered users, as well as to users on other networks.
Further it proposes that Safaricom provides national roaming services to other telecommunication service providers for its 2G, 3G and 4G infrastructure in areas where other service providers have less reach.
However, Safaricom CEO Bob Collymore has opposed this as well as a Bill by Gem MP Jakoyo Midiwo that is also pushing for its split.
“We do not believe dominance in itself is a crime. If you have players who are not as efficient, you cannot blame the ones who are efficient. We constantly look at what we are doing to see if it’s anti-competitive. It would be irresponsible and a big risk for us to conduct our business in an anti-competitive way,” Collymore (left) was recently quoted as saying.
Linus Gitahi, a former chief executive officer, Nation Media Group and now chairman, AIB Capital,
is also among those who have opposed the proposal to split Safaricom, saying doing so would be punishing success.
He avers that M-Pesa has grown organically supported by massive investments from shareholders and thus making them separate entities will plunge them into distress.
“A critical look at the proposals shows patently clearly that if they are implemented, they will have the opposite of the desired effect. They will cut the legs of Safaricom, crippling the goose that lays the golden egg. And the competition will not get relief in any appreciable manner. It is a lose-lose proposition,” he wrote in the Daily Nation on Wednesday.
But Kiriro wa Ngugi, a consultant in public affairs and policy, dismisses Gitahi’s argument as well as an earlier one by Nation Columnist Jaindi Kisero on the issue, suggesting they were working on the side of Safaricom.
He accused the telco of using unfair tactics to frustrate competitors especially in the mobile money transfer service.
Also writing in the Daily Nation Friday, he suggested that MPesa should be a separate entity that is licenced by the Central Bank of Kenya and not the Communications Authority.
In addition, he is suggesting the creation of a new separate legal network facilities licensee co-owned by Safaricom and Airtel in proportion to their existing infrastructure investments to regulate the sector.
However, Information and Communication Cabinet Secretary Joe Mucheru, however, denies a decision has been made on the matter, terming the consultants’ report as work in progress.
But he agrees there is need bring fair competition in the telcoms sector and hence ongoing discussions on how to deal with the Safaricom case.
“We have been having discussions with all the telecommunications operators in the country and we’ve agreed to look at things like national roaming, we’ve agreed to look at the interpolability of mobile money,” citizen.co.ke quoted Mucheru as saying.
“Right now Safaricom is not even in the top 10 telecos in Africa. Now we start splitting our business and yet we want to take advantage of Africa. This will be a big problem.”
But some like Ngugi are seeing this onslaught on the draft report as part of manouvres to frustrate its implementation.
In the National Assembly, Midiwo, in pushing for his piece of draft legislation, says Safaricom cannot continue to operate as a single entity, noting that it has now even entered into tax business, using a telco licence.
While Safaricom can count on the government’s help – it owns 35 per cent of the company – to ward off the CA, the parliamentary initiative is particularly unpredictable.
Midiwo (left) is seeking to amend the Kenya Information Communication Act to require mobile phone operators that venture beyond telecommunication services split their businesses.
In light of these uncertainties, Ndemo’s appointment as an independent and non-executive director appears timely.
His appointment took effect immediately it was approved during a board of directors’ meeting Thursday.
While, there is no evidence that this was the motivation behind his appointment, there is a precedence.
Recently, Base Titanium, which is at loggerheads with the government over revenue sharing tapped lawyer Desterio Oyatsi to join its board. He is President Uhuru Kenyatta’s lawyer.
Mr Oyatsi sits on several Boards and is currently Chairman of Metropolitan Life Insurance Kenya Limited and the Commercial Bank of Africa (CBA) group. The latter is associated with the Kenyatta family.
Analysts were quick to point out that the Canadian firm is keen to make use of his high-level connections and experience to enhance its negotiations with the relevant Government agencies.
Mr Oyatsi has been involved as an advisor with the Kwale mineral sands project since its inception, particularly in talks that led to the grant of the legal instruments and rights upon which the Kwale mineral sands project operates and as a member of the Resettlement & Compensation Committee which oversaw the successful resettlement and compensation of the local community.
In a statement, Safaricom said Dr Ndemo is a noted ICT industry expert who currently lectures on entrepreneurship and research methods at the University of Nairobi’s Business School.
Most of his research centres on the link between ICT and small and medium enterprises in Kenya.
Prior to that role, Dr Ndemo served as the Permanent Secretary of Kenya’s Ministry of Information and Communication between 2005 to 2013. During his tenure in Government, he initiated several transformative projects including infrastructural and development programmes, as well as marketing Kenya as a destination for Business Processing Outsourcing.
He has spent more than two decades in the classroom and lecture halls with over 20 years of experience lecturing at the university level.
Also named to the board was Vivek Badrinath as director of the company representing Vodafone Kenya Limited effective January 12, 2017, following the resignation of Serpil Timuray from the board of directors.
Mr Badrinath is the current CEO, AMAP Region for Vodafone having joined Vodafone and the Executive Committee as CEO of AMAP in October 2016. In his current role, he oversees Vodafone’s operations in the Vodacom Group, India, Australia, Egypt, Ghana, Kenya, Qatar, New Zealand and Turkey.
Prior to that, he was the Deputy Chief Executive at the international hospitality group AccorHotels where he was responsible for marketing, digital solutions, distribution and information systems.
He was previously Deputy Chief Executive with Orange and has a long career in telecommunications, Technology, and Enterprise Services within Orange. Between 2000 and 2004 he ran the Indian operations of Thomson.
He was a Board member of Nokia between 2014 and 2016. Mr Badrinath is a recipient of the French National Order of Merit and was appointed a member of the National Digital Council by the President of France.
“Both Board members will bring vast talent and understanding of the global business landscape, as well as unique insights into the world of telecommunications to our business. Our Board will be enriched by their knowledge which will enhance Safaricom’s ability to navigate an increasingly multifaceted industry,” said Mr Nicholas Ng’ang’a, Safaricom Chairman.