31 March 2014

Kenya: Yumobile Sale Rules to Alter Telco Game

A raft of conditions set by the Communications Authority of Kenya on sale of yuMobile and licensing of new players are set to pry open Safaricom's long guarded turfs.

The regulator gave nod for Safaricom and Airtel - the country's two largest mobile phone services providers - to acquire Essar Telecom's yuMobile, granting it an exit.

However, CAK pegged the deal to a condition that the two must open up their infrastructure and agent networks for mobile money transfer and line registration, laying bare Safaricom's MPesa network if it takes the bait.

The telcos were yet to respond to our queries on whether they would take the deal under the conditions set. On Friday, Safaricom's corporate affairs director Nzioka Waita told the Star: "We have to look at them before we can respond."

Airtel Africa's vice president for communications Michael Okwiri had similarly not responded to our Friday email. Director-general Francis Wangusi said the Kenya Information Communication Amendment Act requires "infrastructure sharing and collocation".

"We are in the right direction in ensuring that the available scarce resources are not put to waste," Wangusi said. "We were worried about concentration of spectrum at one point and then it's not optimally used. If the agents were shared, it would be possible for these players to compete favourably... and that would promote a competitive landscape."

Safaricom is interested in Essar's passive 453 network sites and their leases, data centre, existing office space, spectrum and residual assets including IT infrastructure. The combined (Safaricom and Airtel) deal is reportedly value at Sh8.65 billion ($100 million).

Safaricom must now submit details on infrastructure sharing with other licensed operators on commercial basis and its intention to host Mobile Virtual Network Operators by providing the number to be hosted, as well as timeframes for the takeover.

It has been reluctant to share infrastructure with other players. The move would be a game-changer, as CAK also approved three MVNO licence applications by Finserve Africa (Equity Bank's subsidiary), ZionCell and Mobile Pay - all Airtel's infrastructure network. The MVNOs must also meet regulatory requirements.

Wangusi said MVNOs could not roll out infrastructure of their own because of the heavy investment involved and also because the spectrum "was scarce" to be distributed to every player. "Whoever has... spectrum should be capable and willing to share their extra and excess capacity with others to promote competition," he said.

"By compelling the network infrastructure operators to share their passive and active infrastructure, then we would be able to allow those who are creative to provide various services and also compete in various market segments with established operators."

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