Our operating environment

Market trends

Growing demand for mobile data and converged solutionsWhen it comes to the mobile economy, Sub-Saharan Africa is the fastest growing region inthe world, driven by continued improvements in affordability of smartphones and mobile data plans. However, Sub-Saharan Africa continues to be the largest non-internet population in the world, with rural coverage a major challenge along with other barriers. With our position at the forefront of the digital transformation in Kenya, we see many opportunities in powering digital lifestyles by offering affordable 4G smartphones and data plans and growing our 4G sites.

The rise of the platform economyMobile-enabled platforms are increasingly disrupting traditional value chains across the region. These platforms – mostly developed by a rapidly expanding local tech start-up ecosystem – aim to eliminate inefficiencies in conventional business models, as well as extend the reach of services and provide greater choice to customers. Four key verticals on which mobile platforms are having a significant impact are financial services, commerce, transport and logistics.

The expansion of mobile moneyMobile money is a key enabler for people with limited access to traditional financial institutions, including those on low incomes and rural communities. Kenya continues to lead the way and the growth trajectory of mobile money is likely to remain strong, especially with more Kenyans adopting online shopping.
Future growth of mobile money services in Sub-Saharan Africa will be largely driven by interoperability of mobile money services, giving users the ability to transfer between customer accounts held with different mobile money providers and other financial system players. Opportunities lie in the implementation of innovative solutions to integrate mobile money platforms with the broader financial ecosystem.

Fluid competitor spaceEven as global trends continued to drive more use of data products, the local mobile landscape also started to shift with the announcement of a merger between Telkom Kenya and Airtel Kenya in February 2019. The transaction is still undergoing regulatory approvals, however it is expected to significantly alter the industry profile giving customers a stronger player.

Global health emergency

Following the reports of the first coronavirus case in Kenya on 13 March 2020, Safaricom acted quickly to use the power of its network to set up several solutions in order to assist with the national response to the epidemic. Within the first three months of the crisis, Safaricom had implemented measures to cushion customers and Kenyans at large from negative impact valued at KShs 5.5 billion, including the establishment and operation of a 24-7 COVID-19 Information Centre, leveraging the capabilities of its Customer Contact Centre.
Safaricom embedded over 300 doctors to support the frontline staff in educating, informing and managing the spread of COVID-19. Safaricom also doubled data capacity for its Fibre at Home customers and removed transaction costs on M-PESA for amounts below KShs 1,000.
In addition, Safaricom launched Bonga for Good, an initiative that sought to empower customers by handing them an extra cash flow to buy food and essential services by enhancing the value of their Bonga Points by 50%, from 20 cents to 30 cents. The initiative also empowers customers to donate their Bonga Points to those in need as a show of goodwill.
In line with the unprecedented and extraordinary steps taken by regulators around the world to create enabling policies in order to assure technology availability during the crisis, Safaricom heavily engaged its regulators to identify ways to enhance operations for the benefit of customers.
Locally, the regulator has taken steps to monitor network performance by requesting weekly reports from all operators to ensure stable network availability for customers.

Regulatory risk

With the rising growth of data-savvy consumers tempered by the fact that voice and SMS use has started to plateau, competition between operators continued to drive acquisition, even as pressure on the consumer wallet continued to increase due to the economic environment. This meant that Safaricom had to both identify new opportunities even as it attempted to retain consumer interest in its products.
These influences shaped the regulatory environment for Safaricom and demonstrated the need for more supportive policies to create a more competitive and vibrant playing field.

Enabling future growth through judicious taxationStudies show that Kenya’s telecommunications sector’s growth is hampered by above average taxation on mobile services, which increases the cost of using mobile services and limits more widespread access.
According to a recent report on tax in Kenya by the GSMA, the tax contribution of the mobile sector in Kenya is high compared to other countries in Sub-Saharan Africa (SSA). In 2018, the total tax contribution of the mobile sector was estimated at KShs 97 billion ($954 million), representing 37% of the total market revenue. This was above the average in SSA (26%) and any other reviewed region, including Europe (21%) and Latin America (18%).
Further, the Kenyan mobile sector makes a large contribution in taxes and fees relative to its economic footprint; while the mobile market revenue accounted for 3% of Kenya’s GDP, the sector’s tax and fee payments accounted for around 6.5% of government total tax revenue. The tax contribution of the mobile sector is therefore 2.2 times its size in the economy. This is limiting mobile operators’ ability to make the necessary investments in Kenya’s mobile networks and improve the affordability of mobile services.
Mobile operators in Kenya make a significant and valuable contribution to the economy and society. There is potential for the mobile sector to make a far greater economic and social contribution by increasing mobile connectivity, so everyone can participate in the country’s digital economy.

New registration governance measuresThe Communications Authority in November 2019 issued draft Guidelines for Reporting on SIM-Card Registration by Telecommunication Operators for public consultation. The Guidelines provide for more robust measures for SIM registration in Kenya.
A joint communication from the MNOs was sent on 31 January 2020 to the Authority highlighting the various concerns regarding the implementation of the Guidelines.
In its latest draft on the regulations, the Authority introduced a new provision for setting up of a USSD code to enable subscribers confirm numbers registered against their National IDs.
In May 2020, Safaricom launched a service that enables customers to alert customers once a SIM card is purchased in their name.
Whenever a customer’s National ID number is used to register a new SIM card, they receive an SMS notification from service number 707 asking for consent. The customer will be prompted to accept or cancel the registration. During the registration, if a customer responds with ‘no’, the new line will not be registered and the matter will be escalated automatically to the Safaricom fraud team for investigation. If the customer chooses not to respond with either of the options given, the registration will not be completed.

Data Protection Act 2019The Data Protection Act, 2019 came into force in November 2019. The Act establishes the office of the Data Commissioner and makes regulation for the processing of personal data, rights of data subjects and obligations of data controllers and processors.
The Act outlines the various principles of data protection and further defines the lawful basis for processing of personal information. Safaricom, as a data controller and processor, is required to register with the Office of the Data Commissioner once the same is up and running. The Public Service Commission declared vacant the position of the Data Protection Commissioner on 25 March 2020, kickstarting the recruitment process. Interested parties had until 14 April 2020 to submit their application. It was anticipated that the Data Protection Commissioner shall be appointed before the end of the government fiscal year on 30 June 2020.
Thus far, a data protection officer has been recruited for the Company to guide on various matters touching on privacy and a privacy department has been established in the Risk Division. A data protection policy framework has also been developed for use internally. A data privacy impact assessment was conducted Company-wide to establish the various processes and procedures that touch on personal data and the privacy department is putting in place mitigation measures to ensure that our processes align to the Act.