The Kenya Information and Communications (Amendment) Bill 2019, sponsored by MP Elisha Odhiambo, seeks to compel a mobile network operator to legally split or separate its telecommunications business from other businesses it operates (like mobile money transfer and lending units). The bill will also require companies to provide separate accounts and reports regarding all operations carried out.
We view the approval of this bill as a potential negative for Safaricom as the net costs of implementation may not benefit the stock. Moreover, the implementation may lead to further regulations related to the perceived dominance of Safaricom, primarily in M-Pesa. For now, we reiterate our Hold recommendation pending further information.
It is likely that the government will not approve the bill. However, if it does, Safaricom will incur additional costs from legally separating M-Pesa via separating its employees, management and branding. On the other hand, this may also mean that Safaricom could be granted a digital broadcast licence, which would allow the company to offer its own content alongside its fixed internet services.
The proposed amendment revives a recommendation proposed by Analysys Mason to regulate Safaricom's dominance by implementing a functional separation of M-Pesa from its other business streams. This was rejected by the ministry of ICT in February 2017.