CIO East Africa - Business Technology Leadership

Zain accuses Safaricom of unfair practices

Written by Dennis Mbuvi

Thursday, 19 August 2010 14:19

In a press release arriving today morning, Zain has accused Safaricom of deliberately not increasing the channel that it allocates to handle calls and SMS coming from Zain to Safaricom. This comes a day after Zain announced a more than 50 per cent reduction in its call and SMS costs. Charles Njoroge , the Director General of the Communications Commission of Kenya (CCK) acknowledged receiving the complaint and said that he was looking into it. Meanwhile, Larry Madowo from KTN has reported that he will be tweeting a one-on-one interview with Michael Joseph on the matter and that Safaricom will be issuing an official statement later in the day.

Below is the press release.

Just a day after launching the industry-shaking low cross-network charges, Zain Kenya is accusing competitor Safaricom of sabotage. The company has written to the Communications Commission of Kenya, asking the regulator to stop Safaricom from “abusing dominance” by offering only limited capacity for cross network calls coming from the Zain network.

“Our customers are experiencing congestion and call set up issues when they call Safaricom and not when calling Zain. This is purely for the simple reason that our main competitor has been delaying the capacity increase request from our side to accommodate the incremental traffic coming from us after we launched our new offer in the market,” said Mr Rene Meza, Zain Kenya Managing Director. Mr Meza said despite having made requests to Safaricom, their competitor had remained uncooperative. “We requested Safaricom through the agreed contact persons for the reconfiguration of the Points of Interconnection to accommodate increased traffic going from Zain to Safaricom to accommodate our new tariff offer to customers. We simply requested for a swap out of some circuits from the Safaricom to Zain link to the Zain to Safaricom link. In our experience such a request can be accommodated in a matter of minutes and at no cost. Much to our surprise, we could not get a commitment from Safaricom as to when the configuration would take place,” he said.

Mr. Meza said the continued delay was affecting the quality of service and was also denying customers an opportunity to take full advantage of the new price offering on calls to any network in Kenya, and in this particular case when calling Safaricom. “This is a clear sign of abuse of dominance where customers are being penalized for choosing a much better value proposition. This leads us to conclude that Safaricom is deliberately trying to frustrate our customers by making the experience of calling Safaricom unpleasant. Such behavior is in our view also anti competition and is intended to stifle competition,” he said.

Following the 50 per cent cut in cross network rates yesterday, traffic from Zain to other networks is expected to rise steeply. The company says the new pricing model is part of its strategy in its “new journey towards market leadership”. Mr. Meza said the delay by Safaricom in “expanding” the route to accommodate the incremental traffic from Zain customers will not stop Zain’s quest in attaining the market leadership position.

Zain Kenya is now imploring the regulator to invoke Kenya Communications and Information (Fair Competition and Equality of Treatment) Regulations, and declare Safaricom a dominant operator in order to check against anti-competition tendencies. “In view of Safaricom’s dominance in the retail voice market and monopoly of its own network, they should be subjected to the much needed regulatory oversight which we believe will instill discipline and safeguard the telecoms market from anti-competitive behavior and protect consumers from erosion of their welfare,” said Mr Meza.

Zain Kenya yesterday lowered its calling charges across all networks to 3 Kshs and 1 Ksh for SMS becoming the first mobile phone company in the country to pass to customers the benefit of the new low interconnect charges released by the Communication Commission of Kenya.

Update: Safaricom has responded with the following in a Press Release this Afternoon

Listed telecoms operator Safaricom has today moved to reassure its competitor Zain Kenya, saying concerns raised by the latter over Safaricom’s handling of traffic originating from its network were somewhat premature.

“We must admit that we are quite surprised by the claims made by Zain that we are trying to stifle the delivery of their traffic to our network. These claims are quite insincere considering that Zain is fully aware of the procedures that all operators must adhere to when seeking to increase their inter-connect traffic capacity,” said Safaricom CEO Michael Joseph. “Under the agreement the inter-connect pipe belongs to them and they should have upgraded it long before yesterday to accommodate their changed tariff plan.”

Quoting the inter-connect agreement between Zain and Safaricom, Mr Joseph stressed: “The inter-connect agreement between Safaricom and Zain provides for a minimum notice period of seven working days before a request for increased capacity can be effected. Zain’s formal request was received by us late last night (Wednesday 18th, August 2010) and we were in the process of processing it alongside other capacity requests received on the day.”

Safaricom would continue with its unflinching commitment to integrity in all its operations including honouring the terms of agreements between it and its competitors.

“Safaricom has now and in the past continued to adhere to the terms of the inter-connect agreements signed with all operators and wishes to urge other operators to do the same. We have always been ethical in the way we conduct our business and our integrity is the greatest pillar of our success in Kenya. We will however not take responsibility for the consequences of poor planning by other operators,” said Mr Joseph.

“We feel that their request to the CCK to declare Safaricom dominant so soon after the launch of their new tariff is insincere, particularly as it was the result of poor planning on their side.”

He added: “We have always been courteous to Zain, even to the extent of accommodating them when they were unable to clear the significant debt that they owed us. This notwithstanding, we shall continue to cooperate with them as guided by the inter-connect agreement and other industry rules. We invite them to engage us within those parameters.” End.

Did Safaricom intentionally engage in unfair competition practices or is Zain playing dirty by attempting to mud sling Safaricom and getting public sympathy in the process? What do you think.