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Rival Operators to Access Safaricom’s M-Pesa Sales Network

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

Verizon Wireless to Launch LTE Service for Prepaid Customers

Leading U.S. operator Verizon Wireless is scheduled to begin including LTE service with its prepaid plans starting on 17 July. The Verizon Allset prepaid plan starts at US $45.00 for smartphones, which includes unlimited voice/SMS and 500 MB of data. Customers can purchase Bridge Data packs at US $5.00 for 500 MB, US $10.00 for 1 GB and US $20.00 for 3 GB. Additionally, Verizon has been running a promotion which offers customers who sign up for auto pay an additional 500 MB of data. Combined, a customer could have unlimited talk and text plus 4 GB of data for US $65.00—which is significantly less expensive than its postpaid More Everything plan, which includes the same services. Verizon Wireless is the final US Tier 1 operator to include LTE service with its prepaid offers. AT&T, Sprint and T-Mobile have made this service available since early 2013. Verizon Wireless has yet to announce if its prepaid plans will have their maximum LTE capped (as is the case with AT&T) or if they will run at the network’s top available speeds.

This announcement can be seen as further evidence of the saturation of the U.S. mobile market. Verizon had long focused almost exclusively on driving customers into postpaid 24-month contract plans, relying on its superior network reliability to compensate for its higher prices. While this strategy will still generally remain in place (Verizon’s prepaid plans will still be more expensive than those of its rivals), it appears that the operator has been forced to become much more flexible. Compared with the first quarter of 2013, Verizon saw its postpaid subscriber adds decline by 20 percent and its prepaid customer adds down 76 percent. Beyond the general saturation at the high end of the U.S. market, a confluence of factors has worked against the operator: the availability of better preowned smartphones that do not necessitate operator subsidies, increasing consumer discomfort with committing to long contracts and aggressive smaller operators (particularly T-Mobile) willing to push the envelope in terms of price and included plan features. It appears that its increasing marginalization in the more dynamic prepaid market finally forced Verizon Wireless to risk cannibalizing its own postpaid revenues by offering LTE-enabled prepaid plans.

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