In a surprising move, Kenyan MNO Safaricom announced its decision to open up the 85,000-strong agent network of its vastly successful M-Pesa mobile money service to rival operators. This implies that sales agents will now be able to offer Airtel Money and Orange Money services alongside M-Pesa services on the same premises, which will increase the commissions available to these agents. Safaricom has stated that it removed all exclusivity provisions in its M-Pesa agent contracts in February 2014.
M-Pesa’s success is largely acknowledged as underpinning Safaricom’s dominance in the Kenyan mobile market (its share is close to 73 percent). Since its launch in 2007, the mobile money platform has grown exponentially and now has 18.1 million customers. M-Pesa’s popularity is mainly due to the vast size of its agent network. Rivals Airtel and Orange not only have smaller networks, but the growth of their mobile money services has been limited by the exclusivity provisions that prohibited M-Pesa agents from marketing other services and the fact that M-Pesa transaction fees are double for unregistered users than for registered users. Airtel, in fact, filed a petition with the Competition Authority of Kenya (CAK) in 2012 asking it to force Safaricom to open up its network, and a decision was due by June 30, 2014. However, there has been no announcement from the CAK.
Safaricom’s tight hold on the mobile money market is becoming a matter of concern for authorities in Kenya. It has been reported that M-Pesa transactions now account for 30 to 40 percent of the Kenyan GDP. Given this fact, and given that the trend in Africa is more towards inter-operable services, it is possible that Safaricom’s decision to make its network inter-operable may be an attempt to preempt the regulator. Interestingly, a recent study also found that due to rising competition in mobile money services, Kenyan mobile money agents were the least profitable among the eight countries studied in Africa and Asia despite generating the largest number of transactions in the region. The study found that only 58 percent of the agents are expected to be in operation in a year’s time. This may also be a factor in Safaricom’s decision, since opening up its network may be better in the long run than depleting its agent network strength. The operator will still be able to earn revenues from commissions on transactions by users on rival networks and be able to reach a wider market.
Furthermore, as reported in a previous issue of The Tarifica Alert, the strategy adopted by MVNO licensee Equity Bank may also undermine Safaricom’s M-Pesa based dominance in the market. While Safaricom has challenged Equity Bank’s strategy through a complaint to the regulator, it may have seen the writing on the wall. Therefore, it may focus more on strengthening and expanding its product portfolio. For example, it has partnered with Kenya Commercial Bank to offer the Biashara Small range of financial and communication products targeting small and medium-sized businesses—a segment that Equity Bank will also be targeting.
The above item appeared in a recent issue of The Tarifica Alert, a weekly resource that analyzes noteworthy developments in the telecoms industry from around the world. To access all of the latest articles and issues: http://www.tarifica.com/TarificaAlert.aspx
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