Kenya government opposed to lawmaker move to break up Vodafone unit

By Duncan Miriri NAIROBI (Reuters) - Kenya's government is opposed to a move by a legislator to amend the law to break up the country's biggest telecoms operator, Safaricom, the information minister said on Monday. Jakoyo Midiwo, the deputy minority leader in Kenya's national assembly, proposed amendments to the country's communication and banking laws aimed at breaking up Safaricom, which is 40 percent owned by Britain's Vodafone. Joe Mucheru, the information, communication and technology minister, said the move would punish operators for innovations, and discourage investments. "It will make Kenya a very unattractive destination for tech companies that want to come and innovate," he told Reuters. Safaricom 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. Midiwo, who accuses Safaricom of offering banking services without the necessary license, aims to force the firm to run M-Pesa as a separate business from the telecoms service. "We are not for that in any way," Mucheru said, saying it is up to operators to decide if they want to spin off parts of their businesses. Midiwo's proposal will be debated and voted on by parliament. Safaricom is also facing a separate call to be broken up in a leaked draft report on competition in the sector, which was commissioned by the watchdog, The Communications Authority of Kenya (CA). 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. Safaricom rejects the accusations of dominance. CA has not commented on the draft report, prepared by consultants Analysys Mason, saying it was reviewing it. Mucheru said it was unfortunate the report was leaked to the media, before it was analyzed by the regulator and operators, but assured the final decisions on fair competition would be done after careful analysis of the report. "These decisions are not going to be made in the media. They are going to be soberly done through the regulatory process," he said. (Editing by Louise Heavens)