CA moves to hire market dominance consultant

Francis Wangusi, Communications Authority director-general. PHOTO | FILE 

By OKUTTAH MARK, mokuttah@ke.nationmedia.com

In Summary

• The Communications Authority of Kenya is looking for a consultant who will, among other things, identify the relevant markets within the telecommunication sub-sector, the number of players and their respective market shares.
• The consultant is also required to propose the best ways by which the identified barriers and factors considered a hindrance to growth can be minimised or eliminated.

The Communications Authority of Kenya (CA) has begun the process of hiring an international firm that will examine Kenya’s telecommunication and broadcasting sectors for market dominance and anti-competitive behaviour.

as well as give remedies for issues identified.

The market analysis and market power reports will not be completed for at least 18 months, the CA has said in a previous interview, meaning the 10 proposed dominance laws, if enacted by Parliament, can only come into force in March 2017.

The regulations had been expected to be in effect by mid-June. They include a Fair Competition and Equality of Treatment clause that seeks to empower the CA to automatically declare any telecommunication firm with a market share of more than 50 per cent dominant.

The CA says the consultant’s report is expected to offer insights into the market status and facilitate decision-making in prescribing proportionate and appropriate regulatory actions.

Independent research will assist the authority in identifying and developing the key market interventions necessary to facilitate continued growth and economic efficiency in the sector, while promoting sustainable investments, access and affordability, the tender documents say.

The consultant is also required to propose the best ways by which the identified barriers and factors considered a hindrance to growth can be minimised or eliminated.

It is also expected to come up with specific stimulus that can be injected in the Internet/data sub-segment to ensure effective competition, accessibility, affordability and growth.

Hiring of the consultancy firm has been necessitated by what Francis Wangusi, the CA director-general, said is lack of mechanisms that spell out what constitutes abuse of market dominance.

READ: Airtel threatens Kenya exit over Safaricom 'dominance

The proposed market analysis is in line with advice from the Competition Authority of Kenya (CAK) and the Institute of Economic Affairs.

The telecommunications regulator deleted Section 3A in the previous law, which required it to prove abuse of dominance before declaring an operator dominant.

The CA reckons the provision has in the past four years made it difficult for it to punish those abusing dominance in the various market segments.

Kenya’s leading telecoms operator, Safaricom, has opposed removal of the provision saying the proposed regulations could only be introduced after the sector regulator has undertaken a comprehensive review of the telecommunication market, taking into account the general principles of law that guide Kenya’s economic agenda.

turnover for anti-competitive conduct.

The fine is now for an indefinite period of breach, while in the original Act it was for a maximum of three years of continuous breach.

Going with Safaricom’s financial results for the year ended March 2015, when it made Sh163.4 billion in total revenue, the mobile giant could face a Sh16.3 billion penalty if the law is enacted as is and Safaricom is declared dominant.

The principal Act requires “the licensee to pay a fine not exceeding the equivalent of ten per cent of the annual gross turnover of the preceding year, for each financial year that the breach persists.” Safaricom CEO Bob Collymore told the Business Daily in a previous interview that the huge penalties require all stakeholders to understand the process of identifying what abuse of dominance means.

“The penalty is big because abuse of dominance is a serious issue,” Mr Collymore said. “What concerns Safaricom most is not the penalty. Rather it is the process by which the regulator has proposed to declare and penalise those found guilty.”

Safaricom is the leader in almost all segments of the telecoms market, with voice (67.1 per cent), mobile data (65 per cent) and SMS (91.6 per cent). All have contributed hefty revenues to the firm’s coffers even as its two main competitors, Airtel and Telkom Kenya’s Orange, are making losses.