Inside Safaricom’s raging fight with American rival on Sh30 million debt

Safaricom headquarters

Safaricom PLC headquarters in Westlands, Nairobi.

Photo credit: Dennis Onsongo | Nation Media Group

When Safaricom entered into an interconnection agreement with its telco rival, Geonet Communications, both parties viewed it as profit-making venture while subscribers saw an opportunity to make calls internationally cheaply and seamlessly.

The deal signed in October 2016 was to provide Kenyans with lower tariffs and technological services that avoid high roaming (international calls) charges.

But the pair is now in court fighting over interconnection fees after Geonet, a US-based Kenyan telecommunication, failed to settle a bill of Sh30 million prompting Safaricom to disconnect the systems in 2019.

As a result, the industry regulator –Communications Authority of Kenya –has since been brought in and was recently admonished by the court for failing to address the concerns raised by Geonet.

Safaricom and Geonet, which was initially registered in Delaware, USA in 2000, entered into an interconnection agreement on October 24, 2016.

This was a few months after Geonet started piloting its services locally and was to offer calls within its Geosafari network at cheap rates.

By the agreement, Safaricom linked its telecommunication systems with those of Geonet to form an interconnection link.

As of April 30, 2019, Geonet owed Safaricom a bill of Sh30,013,757. When Safaricom asked for payment of the bill, Geonet was unable to pay and Safaricom issued it with a notice to terminate their agreement and suspension of interconnection.

Geonet attempted to avoid the suspension by seeking a temporary injunction in court.

It was granted a conditional temporary injunction in a ruling delivered on December 21, 2020, stopping Safaricom from interfering with the telecommunication interconnectivity link.

But it did not comply with the conditions, such as depositing a bank guarantee of Sh15 million within 30 days.

Hence, the temporary injunction lapsed, and Safaricom went ahead to suspend the link.

After the move, Geonet in October 2020 entered into another interconnection agreement with Telkom, and the same was approved by CA in January of the following year.

However, eight months later Geonet launched a pricing war with Telkom. It informed the CA that Telkom was billing it unlawfully.

It said that Telkom was double billing it for each call. After being informed, the CA responded to Geonet that it was going to deal with the concern raised but the CA failed to handle the issue.

Perhaps due to the business frustrations, on June 27, 2022, Geonet also wrote to the CA requesting it to intervene and compel Safaricom to reinstate the interconnection link “on reasonable terms on grounds of public interest”.

CA neither responded to the letter nor did it take any remedial action or any other favorable administrative action, prompting Geonet to sue again claiming violation of consumer rights.

Geonet claimed that because Safaricom controls a large section of the telecommunications service market in Kenya, Geonet contends that the CAK’s failure to compel interconnection has promoted the abuse of its dominant position in the telecommunications market.

According to Geonet’s director Hassan Katetei Mdachi, CA’s inaction continued to promote anti-competitive conduct as Geonet was effectively locked out of a large section of the telecommunications market in Kenya.

Further, Kenyans and other subscribers of Geonet were unable to communicate with each other easily and seamlessly.

The company provides telecommunication services to its subscribers, but this is dependent upon being interconnected with local mobile operators such as Safaricom and Telkom.

Geonet pleaded that it was suffering financial loss, damage, and extreme inconvenience through the regular inaction of the CA.

But Safaricom’s Senior Legal Counsel, Daniel Mwenja Ndaba, said the petition was misconceived, bad in law, untenable, and an abuse of the court process because Geonet failed to disclose about the previous case and conditional deposit of Sh15 million.

He argued that the court could not compel Safaricom to provide interconnection to Geonet when the commercial dispute is still ongoing.

The CA, on its part, through director-general Ezra Chiloba said the demands contained in Geonet’s letter against Safaricom were premature.

Mr Chiloba said Geonet’s failure to put in motion processes towards the negotiation of an interconnection agreement between itself and Safaricom, it cannot then be said that the CA’s inaction resulted in a violation of the Constitution and the Fair Administrative Act.

On the alleged unlawful billing by Telkom to Geonet, Mr Chiloba said that the interconnection agreement between Geonet and Telkom provided for an elaborate dispute resolution mechanism for disagreements relating to ‘billing and payment’.

Ruling on the dispute, Justice Alfred Mabeya found that CA breached the Constitution by failing to address the concerns raised by Geonet against the two telcos.

“The CA is required to be responsive, prompt, effective, impartial, and equitable in the provision of services to promote fair competition and merit as the basis of its provision of services. The CA barely lifted a finger in response to Geonets concerns,” said the judge.

He said CA is not permitted to state that it did not take any regulatory steps because Geonet did not follow the laid down procedure.

According to the judge, the CA’s role is that of a referee and where disputes arise, it must take steps to resolve the same per the law. The CA should not leave it to the parties themselves to decide the best decision to take, he stated.

“This is why the law empowers the CA even on its own motion to take steps to rectify missteps taken by the parties in the telecommunications industry. Therefore, it breached Articles 10, 232, 46, and 47 of the Constitution,” he ruled.

The judge directed CA to address the concerns raised by Geonet within 60 days and further make an impartial decision that will promote fair competition in the market.

Justice Mabeya said the decision of CA must not be seen to favour persons or interests but must promote the principles of equity in the provision of services.

The judge said according to the Kenya Information and Communication Act and Kenya Information and Communications (Interconnection and Provision of Fixed Links, Access and Facilities) Regulations, CA is empowered to intervene and review the interconnection agreement entered into between parties.

He declined Geonet’s plea for the court to compel CA to direct Safaricom to provide interconnection services to it, and for the court to further compel the CA to resolve the dispute between Geonet and Telkom.

He also found that the regulations are valid and in force contrary to arguments by Geonet.