Kenya’s Telecoms Competition Recommendations a Fight Against Safaricom (Part II)

In the first part of this piece, I addressed the issue of Safaricom being compelled to share their towers with other Tier 1 telcos in an effort to level the playing field for everyone. Well, that’s not the only issue that arises from Analysys Mason’s recommendations.

Aside from requiring that all of Safaricom’s standard tariffs, permanent loyalty schemes and promotions be profitably replicable by other Tier 1 competitors, Section 9.4.5 of the report recommends that the Communications Authority of Kenya (CA) prohibits Safaricom from running individually tailored loyalty schemes and promotions, case in point, Tunukiwa and Storo Bonus.

“Safaricom may not offer loyalty bonuses or promotions for which the qualification criteria require different levels of expenditure or usage by different subscribers in the same category. Categories could include prepaid subscribers, subscribers registered in particular geographic areas and subscribers to a particular tariff plan,” reads part of the report.

To justify this remedy, the report states, “We believe that the lack of transparency and potential discrimination in Safaricom’s Stori Ibambe na Storo Bonus scheme creates an opportunity for Safaricom to behave anti-competitively and makes it very difficult for the CA to test whether the offer is replicable. Consequently, we propose that in the future Safaricom may not offer loyalty bonuses or promotions for which the qualification criteria require different levels of expenditure or usage by different subscribers in the same category.”

Stifling Innovation

I get it, Analysys Mason is worried that there might be some juju behind how Safaricom runs some of these promotions, in particular when it comes to categorizing subscribers by how much they spend on the network, the criteria which Tunukiwa and Storo Bonus seem to employ. The report even claims that Safaricom’s market power could put the company in a position where it can discriminate amongst its own subscribers and this is why they recommend CA to not allow Safaricom to run such promotions.

However, the underlying issue here is understanding the reason such tailored promotions exist. We all use our phones differently, spend a certain amount of airtime daily and have different uses for data, SMS and Calls. These tailored promotions not only encourage subscribers to spend money on the network but they do so without pushing the financial limits of the subscriber. In short, the tailored promotions are an innovation that Safaricom uses to gain mileage.

Safaricom’s market leadership is as a result of years of innovation and millions of investment

Like any other consumer-facing company, Safaricom needs to constantly innovate and come up with new products and services to entice new customers and keep current customers interested. Analysys Mason’s recommendation to bar Safaricom from offering individually-tailored promotions will go a long way to stifle the company’s innovation may hurt the consumer in the long run, since there will no longer be the need for competitors to “innovate” to match what Safaricom is offering.

Angeline, through Kenyan Wall Street, terms this move as one that shifts the focus from the customer, “Therefore, by removing the focus from the customer, innovation decreases. Innovation is defined as the process of bringing to customers new products, new services, and new processes. That means when regulation creates a level playing field for all players, they will become lax and less inclined to innovate more,” she writes.

If CA is to implement such a restraint, let it be done across the board. Don’t cut the arms of one player to allow the other players to eat, instead, give equal portions of food to everyone. Like it’s huge investment in network coverage, Safaricom uses said promotions to set itself apart from the pack. As I conclude, it is prudent to note that Safaricom’s market leadership is as a result of years of innovation and millions of investment. As Mbugua Njihia said, “The market has favoured all players differently in the past. Some had a first mover advantage, others had a solid infrastructure plus asset base while others had access to deep pockets courtesy of a global pedigree.”