Airtel Kenya has completed the separation of its telecommunications business from mobile money, the Central Bank of Kenya (CBK) announced yesterday.
The move sets the stage for Safaricom and Telkom Kenya to follow suit.
The Communications Authority of Kenya (CA) will now licence Airtel Kenya to only offer voice, data and SMS services, while its mobile money service, Airtel Money, will be licensed by the banking regulator, CBK akin to commercial banks.
The landmark move has shifted focus on Kenya’s biggest telco Safaricom, which has been facing mounting pressure to split its lucrative M-Pesa unit from its telecommunications business.
“CBK welcomes this milestone,” said the regulator as it announced Airtel’s move.
CBK noted that Airtel’s split and the looming split of the other two telcos would enable the operators to “ring-fence” their operations and “improve their governance.”
“This sets the foundation for Airtel Money Kenya Ltd (AKML) to enhance governance over its mobile money business, strengthen its operations and offer better services to its customers,” said the regulator in a statement.
Payment service
The banking regulator said the move sets the stage for other players to follow suit. “CBK has engaged payment service providers to ensure that the activities under CBK supervision are appropriately ring-fenced from other business lines,” said the regulator.
“This will allow the payment service providers to protect their CBK-regulated activities from shocks emanating from the other business activities.” The move, CBK further noted, will also enable the firms to “strengthen their governance, enhance resilience and focus on improving services to their customers.”
Safaricom yesterday remained tight-lipped when reached for comment on the matter.
On the other hand, Telkom Kenya had not responded to our queries by press time.
Airtel Kenya, a unit of India’s Bharti Airtel, has been bracing for a post-split environment.
In July this year, it picked the former chief executive of the Central Depository and Settlement Corporation (CDSC) Rose Mambo as chairperson. Her appointment was seen as a bid by Airtel Networks Kenya to tap her contacts and experience in the local financial services sector.
Airtel Networks Kenya had earlier split its mobile money business into a separate entity – Airtel Money Kenya Ltd, following the entry of minority shareholders into the venture. The spinoff came after the London-listed Airtel Africa Plc sold a 25.77 per cent stake in its local mobile money business as part of a deal that saw it raise $550 million (Sh66 billion) from four institutional investors.
CBK Governor Dr Patrick Njoroge recently indicated that the split of telcos’ businesses was imminent, saying a road map for the exercise could be in place by January next year.
“We want to be sure that those sorts of issues are dealt with,” said Dr Njoroge.
“To secure the operations on the money side… we are now much further ahead in this thing, hopefully before the end of the year but definitely by January,” he said. In the run-up to the August General Election, the Kenya Kwanza Coalition promised that it would split Safaricom into several standalone business units if it won the elections.
“Effective immediately after forming the government, the administration will seek the break-up of Safaricom Ltd into two distinct and separate business entities with a mobile telecommunications institution under the direct jurisdiction of the CA and the financial institution firmly under the jurisdiction of the Central Bank of Kenya,” said the ruling coalition in its manifesto.
Safaricom had initially resisted calls to split its telecommunications business from mobile money when the debate about dominance came up. A distinct M-Pesa unit with all the rights to operate like a traditional bank would give commercial lenders a run for their money, according to analysts and insiders at Safaricom.
SOURCE: THE STANDARD
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