A renewed push to force Kenyan telecom companies Safaricom, Airtel, and Telkom Kenya to separate their mobile money services from telecommunications has gained traction.
This movement follows the tabling of the Kenya Information and Communications (Amendment) Bill 2022 for its second reading in Parliament.
The proposed legislation seeks to compel telcos to separate their mobile money services from their traditional offerings, including voice, data, and SMS.
If passed, mobile money services like Safaricom’s M-Pesa would be regulated under the Central Bank of Kenya (CBK), requiring new operational licenses.
This proposal has been met with fierce resistance from Safaricom, which has termed the Bill as retrogressive and harmful to innovation.
Legislative Journey of the Bill
The bill’s journey through Parliament includes six stages before it can be signed into law. The second reading, held this week, saw Members of Parliament (MPs) engage in debates about the proposal, which Safaricom claims goes against international best practices.
Safaricom raised concerns before Parliament’s Communication and Information Committee, arguing that the split would stifle innovation and hamper the growth of mobile money services.
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Following the second reading, the bill moves to the committee stage, where MPs will debate and vote on specific clauses, including the contentious proposal to separate mobile money services.
The final reading will see MPs vote on the bill’s approval before forwarding it to the President for assent into law.
Safaricom’s Position on the Split
Safaricom, the dominant player in Kenya’s telecommunications industry, has voiced serious concerns regarding the financial implications of the proposed split.
The telco has disclosed that if forced to separate its mobile money business, it could face a tax liability amounting to KES 75 billion.
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The company is reportedly lobbying for an international reorganization to avoid these hefty taxes. Earlier this year, the CBK announced plans to meet with Safaricom and the Treasury to discuss potential tax waivers.
A History of Legislative Attempts
This is not the first attempt to force the separation of mobile money services from telecommunications businesses.
In 2021, a similar push was made through the Kenya Information and Communications (Amendment) Bill, but MPs initially shelved the debate.
The bill was reintroduced in November 2022, amidst growing concerns about Safaricom’s dominance in Kenya’s mobile money, voice, and data markets.
Safaricom’s market share across various segments is overwhelming. The company controls 95% of the mobile money market, 65.5% of the voice market, 37.4% of the fixed data market, and 89.4% of the SMS market.
This dominance has fueled the debate over whether such significant control should be allowed to persist without greater regulatory scrutiny.
Other Telcos’ Response to the Proposed Separation
While Safaricom resists the move, other telecom operators have already taken steps toward separating their mobile money businesses.
In July 2022, Airtel Kenya split its mobile money service into a distinct entity, Airtel Money Kenya Limited (AMKL). This separation aimed to enhance customer service and governance, and AMKL subsequently received its Payment Service Provider (PSP) license from the CBK in early 2022.
Telkom Kenya also announced plans in 2021 to reorganize its operations by creating two wholly-owned subsidiaries: Telkom Digital and T-Kash.
However, the telco faced delays in receiving approval from the Communications Authority of Kenya (CA), slowing the formation of these entities.
Safaricom’s Financial Success Amidst Debate
Amid these regulatory challenges, Safaricom continues to report impressive financial growth. The company’s earnings surpassed KES 140 billion, making it the first company in East Africa to cross the billion-dollar revenue mark.
In the last financial year, Safaricom Group’s total revenue grew by 13.4% to KES 335.3 billion, with M-Pesa contributing 42.4%, or KES 140 billion, of the total revenue.
As the debate around the split intensifies, industry stakeholders are closely watching the parliamentary process to see how the proposed legislation will shape the future of mobile money services in Kenya.
Whether MPs will retain or reject the contentious clauses remains to be seen, but the outcome could significantly alter the country’s telecommunications landscape.
