Report recommends Safaricom should be broken up - Business Daily

NAIROBI (Reuters) - A report commissioned by Kenya's telecoms regulator recommends breaking Safaricom up into separate telecoms and financial services businesses because the firm is too dominant, Kenya's Business Daily newspaper said on Thursday.

The Communications Authority of Kenya (CA), which asked consultants Analysys Mason in May to study competition in the sector, declined to comment on the leaked findings, saying the draft report was being reviewed internally.

Safaricom, which is 40 percent owned by Britain's Vodafone, is by far the biggest telecoms firm in Kenya. It has 26 million subscribers and dominates the thriving mobile-based financial services sector with its innovative M-Pesa platform.

"It's a malicious act to leak such a damaging report without first consulting or at least sharing it with us," Bob Collymore, the chief executive of Safaricom, told Reuters.

The regulator said the draft findings would be discussed with mobile operators in Kenya before Analysys Mason, which specialises in telecoms, media and technology, prepared the final version.

The leaked report comes two days after Jakoyo Midiwo, the deputy minority leader in parliament, said he was proposing amendments to banking and communications laws to force Safaricom to separate M-Pesa, which is regulated by the central bank.

Safaricom is Kenya's biggest firm by market capitalisation and dwarfs the two other operators in the mobile market: the local subsidiary of India's Bharti Airtel and Orange, which the French telecoms company agreed last year to sell to London-based Helios Partners.

The smaller operators have long argued that Safaricom enjoys a dominant position because it accounts for 90 percent of revenues in areas such as voice calls and text messages.

Collymore rejected the claim Safaricom is dominant and said any moves to clip its wings using the study commissioned by the regulator were designed to help rivals rather than consumers.

He said the publication of the leaked draft had already undermined foreign investors' confidence in the East African country as an investment destination.

"It sends a really worrying message to international investors in investing in the country ... It would imply that this is no longer a safe place," he said.

(Reporting by Duncan Miriri; editing by David Clarke)