Citi analysts have said the proposed remedy to regulate consumer prices in the telecom sector could impact Safaricom’s earnings.

The Communications Authority of Kenya (CA) has hinted that it will implement the recommendations of a study conducted by Analysys Mason. The study was commissioned to find solutions in a market where smaller mobile operators are disadvantaged.

The report makes many recommendations such as tower-sharing, mobile termination asymmetry, and retail price interventions.

“Some [remedies], such as national roaming and MTR asymmetry, may improve the health of competition with a relatively minor impact on Safaricom,” Citi analysts stated in the latest research paper.

“However, in combination with retail price controls, we think, the risk to revenue and margins may rise should smaller peers pass on regulatory tailwinds to consumers in an attempt to boost market share, as opposed to taking care of their own (deteriorating) financials.”

Other Tier 1 mobile operators such as Airtel are pro tariff-regulation. However, Safaricom has cautioned that regulation could lead to increase calling rates.

What’s more, Citi analysts say Safaricom’s M-Pesa could face adverse effects from controlled private sector growth and the introduction of new mobile money products.

“[…] divergence of [the] share of growth in mobile payments in favour of platforms launched by banks, structural migration to cashless transactions are some of the downside risks to M-Pesa revenue growth in the short term,” the analysts said.

M-Pesa revenue increased by 16.2 percent to Sh30.0 billion for the 6-month period ended September 30, 2017. Voice revenue surged from Sh45.7 billion to Sh47.35 billion during the same period. Safaricom’s after-tax profit grew by 9.5 percent to Sh26.2 billion.

On Monday, Safaricom’s share price did not change when the CA made the announcement of the findings as well as the plans to apply them to the telecom sector. The average share price was Sh29.50.

The Kenya Bankers Association (KBA) attempted to provide customers with an alternative to M-Pesa when it launched PesaLink last year. PesaLink’s transaction limit of Sh999,999 is higher than M-Pesa’s Sh70,000




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