Sustainability Performance: At a glance (31 March 2012) - Safaricom

Dynamic regulatory environment
Safaricom operates in a
dynamic regulatory environment
that requires it to ensure
full compliance with licence
conditions, regulations, bylaws
and changes to governing
legislation. Failure to meet
prescribed compliance levels will
expose Safaricom to penalties
and other remedial sanctions
from sector regulators.
R1
Dynamic
regulatory
environment
Some of the risks associated with this
category include:
• Risk of non-compliance with
regulatory requirements
Apart from the conditions set out in
Safaricom’s operating licence, Safaricom
is required to comply with the provisions
of various Acts of Parliament and
the Regulations, such as the Kenya
Information and Communications Act
(KICA), Environmental Management
and Coordination Act (EMCA), Capital
Markets Authority (CMA) and the Kenya
Civil Aviation Act (KCAA). Adherence to
Local Authority by-laws and guidelines,
as well as Codes of Practice developed
by Regulators is also mandatory. Failure
to comply with any of these regulatory
requirements would expose Safaricom
to non-compliance penalties and other
unfavourable regulatory interventions.
Safaricom’s compliance with regulatory
requirements remains very high.
Safaricom files Quarterly Returns with
the Communications Commission
of Kenya (CCK) on a wide range of
parameters, including service levels,
customer management and usage of
spectrum resources. Safaricom will
continue to ensure compliance with all
regulatory and licence requirements,
while ensuring engagement with industry
regulators on issues that affect
our operations.
• Changing legislation and regulations
relating to mobile money transfer
Legislation and regulatory requirements
governing mobile money transfers
are evolving alongside changes in the
Kenyan telecommunications sector.
More specifically, the financial services
provided by Safaricom through M-PESA
are likely to attract regulation, creating
additional compliance requirements.
Any significant changes to existing
regulatory environment may present a
risk to mobile money transfer
services. Safaricom is,
however, engaging proactively
with the Central Bank and other
stakeholders to ensure that any
regulations passed continue to
promote the growth of mobile
money transfer and to deepen
financial inclusion.
• Increasing regulatory fees
Fees paid to regulators (such as
licence fees, spectrum charges,
compliance charges, local
authority payments) remain a
significant cost to Safaricom and
amount to approximately 4% of
revenues. Failure to pay these
fees would expose Safaricom
to penalties and compromise
our ability to operate and deliver
services to customers.
• Safaricom’s perceived
dominance in the market
Owing to our market share,
Safaricom is anecdotally
perceived as being dominant
— although no official finding in
this regard has been made at
this time. If Safaricom is found to
be dominant in certain markets,
the company will be subject to
additional regulatory scrutiny and
obligations.
Competition Law in Kenya
provides that an entity in a
dominant position does not
automatically attract regulatory
sanction unless it is found to be
abusing its dominant position
in the market, in which case, a
heavy penalty of up to 10% of
revenues may be imposed.
In keeping with Competition
Law provisions, Safaricom has
ensured that its operations
and actions in the market are
Dynamic regulatory environment
in compliance with the law and has
engaged in competition with other
operators using superior product
offerings, customer management, quality
of service and a strong brand as key
differentiators.
• Development of Long Term Evolution
(LTE) in the Kenyan market
Long Term Evolution (LTE) is currently
being discussed by Government
as a way to offer more broadband
capacity in the telecommunications
market. Accordingly, Safaricom has
to ensure that it is ready to offer these
services from both a technological
and infrastructural perspective in
order to remain competitive in the
telecommunications industry.
Long Term Evolution
Long Term Evolution (LTE) is a Fourth
Generation wireless broadband
technology. It is an easily deployable
network technology, which offers high
speeds and low latencies over long
distances.
Our approach
For all of the risks identified, Safaricom’s
strategy to mitigate or manage them includes:
• Proactively ensuring compliance
with licence obligations, legislation,
regulations, by-laws and regulator
guidelines.
• Actively engaging with regulators
through face-to-face meetings, written
submissions and memoranda when
changes to the existing environment are
under discussion.
• Facilitating workshops and information
sessions with regulators, members of
the media and affected stakeholders to
discuss public policy issues.
• Attending stakeholder workshops and
lobbying on behalf of the industry.
52 Safaricom Sustainability Report 2012
Safaricom Sustainability Report 2012 53