May 9, 2018 / 6:04 AM / a year ago

UPDATE 3-Kenya's Safaricom warns of price controls threat

* Sees profit before interest, tax up 7-12 pct in 2018-19

* Strong demand for financial services, mobile internet

* Company controls about 72 pct of Kenya’s mobile market (Recasts with chairman’s comments on regulations)

By Duncan Miriri

NAIROBI, May 9 (Reuters) - Kenya’s dominant telecoms operator, Safaricom, predicted strong profit growth this year due to an easing of political tensions and hit back at mooted regulatory proposals to control data and call prices.

The firm, which is 35 percent-owned by South African group Vodacom, was shaken early last year by a leaked draft study on competition in the sector, which proposed a split of Safaricom into two due to its large size.

The proposal was abandoned in the latest version of the draft study but chairman Nicholas Ng’ang’a said other potentially damaging proposals remained.

“These include attempts to change the rules of the game by introducing price controls and regulated infrastructure sharing,” he told investors.

“We could be heading into an era where success, rightfully earned, through well-structured market strategy, innovation and investment is penalised.”

Safaricom, in which the Kenyan government and Britain’s Vodafone also have shares, controls 72 percent of Kenya’s mobile market, with close to 30 million subscribers.

It also has a commanding lead in mobile phone-based financial services through its M-Pesa platform, which is regulated by the central bank. However, it rejects all claims that it has abused its market position.

“Being successful is not a crime. Abusing your success is a crime. None of the studies have found Safaricom abusing its dominance,” chief financial officer Sateesh Kamath told Reuters after a results briefing.

Profit before interest and taxes should rise 7-12 percent to 85-89 billion shillings in the year to April 2019 as a bounce in economic growth lifts demand for financial services and mobile internet usage, Kamath said.

The two revenue streams contributed 73 percent of the company’s 10 percent growth in last year’s service revenue.

Fixed data - provision of internet through fiber lines to homes - had grown faster than expected.

Revenue from the fixed internet business surged 27 percent to 6.67 billion shillings ($66 million) as the number of connected homes nearly tripled to 140,000, Kamath said.

CEO Bob Collymore, who has been on medical leave since October, addressed the briefing in Nairobi by video conference and said his treatment would continue for a number of weeks.

Kamath said Collymore had helped in the running of the company from his sick bed.

“When the physical condition and the doctors allow, he jumps into calls with us, he guides us. When we are in London we go and meet him, take advice,” he said.

$1 = 100.55 Kenyan shillings Editing by Ed Cropley and Mark Potter

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