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The interoperability trials for mobile money set to start this Monday promise to re-ignite hope that the competitive telecom industry is ready for self-regulation.


This is after Safaricom (NSE:SCOM) and Airtel, who have engaged in a fierce battle for control of the mobile money industry in Kenya for over a decade, agreed to work together in testing the systems starting Monday.


Interoperability is expected to further revolutionise sending money by phone and expand it further, given that a customer can send money or receive money across all networks, seamlessly.


Information Cabinet Secretary Joe Mucheru said on Friday that mobile money interoperability will improve access and efficiency in the industry.

“This is a service that will make sending and receiving money across networks seamless and will have a lot of benefits for the users who will not be limited in their options,” said Mr Mucheru.


The ICT Cabinet Secretary also said there will be more competition, which could lower the prices of the services.


Telkom Kenya, the third mobile operator, is expected to join the scheme later after completing redeveloping its mobile money platform that it withdrew from the market last year.  


“Lack of interoperability has been highlighted as a major barrier to the development of the mobile money market. The strongest reason for enabling interoperability is the dramatic increase in mobile money transactions that will result,” a report by eServGlobal, a financial transactions technology company says. 


The trials will test the technical ability of the two systems from Safaricom and Airtel to interoperate. The pilot will involve 200 participants, with each operator contributing 100 employees.   


The testing was arrived at following months-long commercial negotiations. It is an outcome of self-regulation among the players who would otherwise be locked in stiff competition.


The beginning of the trials will see Kenya join other East African countries such as Tanzania and Rwanda who have walked the same path of connecting their systems.


In Tanzania, operators Vodacom (JSE:VOD, DSE:VODA), Airtel, Tigo and Zantel linked their mobile money platforms to one commercial network in early 2014.


Currently, if an Airtel Money customer wanted to send money to a Safaricom M-Pesa subscriber, the Safaricom customer will receive a notification via text message but the balance will not reflect on his M-Pesa statement. To get the cash, the Safaricom customer will have to find an Airtel Money agent to withdraw the cash.


But with interoperability, it means that if the Airtel Money user sends money to an M-Pesa user, the M-Pesa user will actually receive the money on their account and can transact with it or withdraw from an M-Pesa agent.


A report by international telecommunications lobby GSMA published last year says that support for interoperability has grown despite initial apprehension on the loss of brand identity among some operators.


The main players in the telecoms market are banking on the success of interoperability to help eliminate barriers in the mobile money market and eventually shift the market dominance debate to partnership and a need to let free market forces reign.


This is after it was proposed as one of the remedies to deal with competition challenges in the market. At the moment, Safaricom controls the biggest share of the mobile money market.


But players in the sector have started demonstrating that they can eat into Safaricom’s market share, following increased activities by Equity Bank’s mobile money service, Equitel, which is powered by Airtel.


Equitel appears to be getting a footing after its users transacted Sh322 billion in the three months to September, according to the latest report by the Communications Authority of Kenya (CA). This is nearly a quarter of what Safaricom’s M-Pesa moved in the period, having transacted Sh1.3 trillion in the period under review.


M-Pesa services posted a market share of 80.8 per cent during the quarter under review.


This saw Equitel Money’s market share grow to 6.8 per cent while Mobikash stood at 6.3 per cent. Airtel Money and Mobile Pay Limited attained 5.8 and 0.3 per cent market shares, respectively.


The growing traction by Equity into the mobile phone space, coming at time when other banks are pushing their own mobile money transfer service, may also dent Safaricom’s hold on the market.


Safaricom has fought efforts to declare it dominant for more than year, as rivals wait on the wings for an opportunity to cash in on such a declaration. 


The firm has said on several occasions that it does not believe dominance in itself is a crime. It argues that it cannot be blamed for inefficiencies of its rivals, even as it maintains that it has never abused its dominant position.


Mr Mucheru says that mobile operators have also begun discussions on national roaming and tower sharing, which is also expected to further lower the barriers to entry.

 
This will provide other avenues for collaboration and sharing infrastructure among the operators and could cut costs of investments.

 

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