Government opposes intervention in mobile market leader, but move will be debated in parliament; greater regulation still an option.

Kenya’s Safaricom faces the possibility of greater regulation or even a break-up due to its dominant position in the country’s mobile market, but indications are that the government opposes the latter course of action.

A high-profile politician is calling for the telco’s mobile money service M-Pesa to be separated off and he is not the only party interested in addressing the competitive imbalance in the market. A leaked report commissioned by the Communications Authority of Kenya also carries with it the threat of greater regulation or a break-up, the newswires reported this week.

Safaricom leads the mobile market by some margin, its market share standing at 69% at the end of September, according to the regulator’s latest figures, and it has enjoyed great success with its M-Pesa offering.

As a result, Kenya’s deputy minority leader Jakoyo Midiwo has proposed amendments to the country’s communications and banking laws that would facilitate the break-up of the operator, forcing it to spin off M-Pesa into a separate business, Reuters reported. The politician claims Safaricom is operating M-Pesa without the requisite licence.

However, information, communication and technology minister Joe Mucheru told the news service that forcing Safaricom to split would punish telcos for innovation and discourage investment in the market.

"We are not for that in any way," he said, noting that it is up to operators themselves to decide if they want to separate out parts of their businesses.

Midiwo’s proposal will be debated in parliament and a vote taken.

The tech minister also played down the significance of a leaked draft report that allegedly shows Safaricom to hold a dominant position in the market, noting that any decisions will be taken through the regulatory process and not in the media.

The study was undertaken by U.K. analyst firm Analysys Mason on behalf of the Communications Authority. According to Bloomberg, it concludes that Safaricom is dominant in the mobile communications and mobile money sectors and recommends that steps be taken to address the situation, or that the telco be broken up.

The regulator is still analysing the report and is mulling the steps it could take to enable rival operators to compete more effectively, the newswire said.

There is no question that Kenya’s smaller operators are struggling to keep up. Second-placed player Airtel’s market share stood at just 17.5% at the end of September and number three operator Telkom Kenya claimed 7.6%.

Telkom Kenya operates under the Orange brand, but France’s Orange sold its 70% stake in the operator in mid-2016 having failed to turn around its fortunes.