Telco stock outlook dim on new CBK policy

By John Otini
Wednesday, February 3rd, 2021
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In summary

A new policy set to open the national payment systems to competition could affect Safaricom share price outlook, analysts have said.

Citi Bank analysts in a report last weekend eased Safaricom’s stock outlook from a  buy-rating to neutral over what they termed as uncertainty in revenue channels.

The investment bank further said it sees Safaricom stock at Sh33.1 down from Sh35 a share.

“The CBK’s drive to make the National Payment System more collaborative/ interoperable may be seen by investors as a risk to M-Pesa,” said the latest report by Citi Bank’s research arm.

Central Bank of Kenya (CBK) is seeking public input on its proposed National Payment System amendments in which operators will open their payment APIs to third parties such as fintechs opening up the mainstream banking and payment system to intense competition.

Share platforms

The system mimics the mobile money interoperability drive in which mobile operators were to share platforms and even agents.

M-Pesa’s rapid growth has made it a major revenue earner aside from the data market.

The drive by CBK is meant to increase transparency in the market by allowing users move their data from one provider to another to bargain for better services.

This could open the ground for increased competition especially on the pricing front where M-Pesa has been viewed by some as being too expensive.

The company has been one of the few bright spots during the pandemic when most NSE counters have suffered a fall in profitability.

The company which controls nearly 60 per cent of the market capitalisation was yesterday trading at Sh35 a share having closed the previous day at Sh36.

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