Mobile Payments Markets in Kenya, Tanzania and Zimbabwe: A Comparative Study of Contestability and Outcomes.

Abstract

This paper conducts a comparative review of competition dynamics in mobile payments markets in Kenya, Tanzania and Zimbabwe. Three main competition issues have been highlighted across these countries: the impact of agent exclusivity on the ability of rivals to compete; allegations of margin squeeze by dominant Mobile Network Operators (MNO); and, the limiting of interoperability to reinforce network effects and maintain dominance. Underlying all of these types of conduct is the incentive for an incumbent to maintain its dominance in the mobile payments market, and the linked benefit in terms of inducing customer loyalty in the market for traditional MNO services. The paper conducts an empirical analysis of the markets in each country in order to try to understand the extent to which market structure and the presence of a dominant incumbent influences pricing strategies and in turn the impact that these pricing strategies have had on the contestability of mobile payments markets (using market shares over time as a proxy). The main finding is that more competitive outcomes have arisen in Tanzania (where there is greater symmetry between operators) in terms of lower prices, symmetry in the prices charged to registered and unregistered users, and interoperability between operators relative to the other countries. The results of the market structure and pricing analysis suggest that in markets dominated by one large player, regulators may need to consider interventions to ensure the development of interoperability at all three levels: agent, platform and customer; which is important in terms of leveling the playing field for competition.