Vodafone's Safaricom faces break-up call from Kenyan lawmaker

NAIROBI (Reuters) - A Kenyan lawmaker proposed breaking up Safaricom SCOM.NR, the country's biggest telecoms operator, on Tuesday because of its role in providing mobile financial services.

Chief Executive of Kenya's telecom operator Safaricom Robert Collymore speaks during a Reuters interview at their headquarters in Nairobi, Kenya, January 27, 2017. REUTERS/Thomas Mukoya

Safaricom, which is 40 percent owned by Britain's Vodafone VOD.L, not only has Kenya's biggest number of subscribers, it also dominates the country's thriving mobile-based financial services sector with its innovative M-Pesa platform.

M-Pesa has been widely hailed as an example of a developing region successfully adapting a new technology ahead of others and then exporting the idea globally, and as a “good news” story for African business.

Jakoyo Midiwo, the deputy minority leader in Kenya’s national assembly, said he was proposing amendments to laws on banking and communications to force Safaricom to separate M-Pesa, which is regulated by the central bank, from telecoms.

Such a move was necessary because Safaricom was offering banking services without the necessary licence, he added.

M-Pesa, which allows users to send money and make payments even on the most basic phones, has allowed Safaricom to partner with leading banks in recent years, giving it access to the lucrative small loans and deposit-taking business.

Vodafone says on its website that M-Pesa, which means “m-money” in Swahili, was launched in 2007 in Kenya, 2008 in Tanzania and is now present in 10 countries as the global brand for Vodafone’s Mobile Money service.

Safaricom, which is Kenya’s most profitable listed company and the biggest by market capitalisation, declined to comment.

Smaller telecoms operators such as Bharti Airtel Kenya have complained of Safaricom’s market dominance, with 90 percent of revenues in areas such as voice calls and text messages.

“My intention is to break it into several companies,” Midiwo told Reuters by phone on Tuesday.

“I’m doing it through miscellaneous amendment today, this afternoon. I’m amending the banking act, I’m amending the communications act, I’m amending several acts.”

Midiwo’s amendments would have to be cleared by parliament and then signed into law by the president. The passage of the amendments was not guaranteed, Midiwo said, but he pledged to re-introduce them if they fail on this occasion.

“It would be wrong for parliament to sit back and just watch,” Midiwo said, adding that it was the job of parliamentarians to make sure companies operate efficiently and benefit the local economy.

Kenyan firms have expressed alarm over legislative initiatives that could hamper their operations after lawmakers capped commercial lending rates last August.

Editing by Alexander Smith