I have always wondered why one of the major mobile companies is treated with kids-gloves. The current case of SMS price-wars reinforces this concern. I would have thought that after passing the new katiba with Bill of Rights embedded (which includes consumer protection), everyone especially government, would celebrate when Airtel (I hold no brief) lowered SMS charges to KSh 1. This was even after their earlier push for interconnect rate to be pegged to KSh 0.2 was rejected, and instead GoK/CCK (with strong influence from Safaricom) settled on KSh 0.6. While one needs to look at the maths to know whether 0.2 or 0.6 should have been a more justified rate, Airtel has done us one more favour: which all Kenyans of goodwill should support. They have pegged their SMS costs to KSh 1.0, capping ‘other overheads + profit’ to KSh 0.4. I wouldn’t expect Airtel, a global reputable company to do this if the fundamentals were not right – unless it was a fly-by-night company! They confirm what a number of us have worried all along about: that mobile companies are over-reaping profits, most of which is repatriated to shareholders out of the country. My 3 main concerns:- 1) Why would the same people who rejoiced/indeed occasioned retrenchment when nearly 18,000 Kenyans were retrenched on privatizing Telkom Kenya now be so worried about Safaricom retrenching to the extent that they would deny Kenyans an opportunity to reap the benefits of competition, innovation and creativity? 2) CCK is supposed to be independent. Why should the government (read Ministry) always interfere in their decisions? 3) When we are being told “we’ll lose so much revenue in tax collection”, why aren’t we in the same vein being told “but in the process, we’ll reduce capital flight by way of (foreign) investment repatriation by so much”, and even more importantly that “through lower phone tariffs, Kenyan consumers will have saved so much/economy will have grown by so much as a result of cheaper phone costs.”? Indeed some of the observations herein rooting against lower SMS costs remind me of my earlier (pupilage) days at the then KP&TC. For a while, a number of us advocated ‘lower costs, higher volumes’ (something that lately has become better known as ‘bottom billion’). The same way that it was dismissed then appears to me as the same way the ‘mobile price wars’ are being dismissed now by some. Haven’t Equity and Safaricom itself (actually, mobile companies) proven over time that this works? To be honest, every time I am home I shudder about using Safaricom. For voice, I long stopped using my Safaricom number except to receive – heko to Airtel, Yu and others. For Internet, even when I do bundles, Safaricom is still VERY expensive. Instead of government helping (as demanded by the constitution), they are helping to keep the prices up. In the end who really benefits? Certainly not the consumer/ordinary Kenyan! If this approach has worked for Airtel in India (is the population nearly a billion?), why not for Kenya? Best rgrds, Shem ________________________________ From: Leonard Mware <mleonardo@yahoo.com> To: shemochuodho@yahoo.com Cc: KICTAnet ICT Policy Discussions <kictanet@lists.kictanet.or.ke> Sent: Wed, 19 January, 2011 14:33:22 Subject: Re: [kictanet] Are we letting the PS get away with this too? Listers, Two issues are emerging: 1. Operators not able to 'recoup' investment hence possible layoffs, stock market problems etc 2. Taxman losses First, let’s imagine tomorrow the minimum charges are set to 2/- and Airtel moves up. Assume I am a new entrant in the market with cheaper-easy-to-deploy technology. Bear in mind that technology is evolving fast and new multiplexing and radio wave propagation techniques are also advancing. If my technology allows me to set up a GSM network and I can confidently 'recoup' my investment at 0.5/- why should I be forced to charge 2/-? My view is that such a scenario will give rise to a government created cartel that will stifle competition, innovation and advancement. Secondly, who is going to set the base rate? Government? I wait to see how the government can juggle the mathematics of coming up with ‘recouping period’ and satisfy taxman, investors in stock market and operators at same time. The only option, in my view, is for the government to think of higher taxation because that’s where they have leverage and the leave the fight on tariff to operators and market place. The other option is for the government to set up its own National Mobile Operator (NMO) in the line of National Oil Corporation of Kenya (NOCK) to help stabilize market ;) As for stock market; ups and downs are part of the game.. it is called in Kiswahili playing kamari and any investor should know what happens in a casino! BTW, is there a documented precedence in any developing country? Leonard --- On Wed, 1/19/11, bitange@jambo.co.ke <bitange@jambo.co.ke> wrote:
From: bitange@jambo.co.ke <bitange@jambo.co.ke> Subject: Re: [kictanet] Are we letting the PS get away with this too? To: mleonardo@yahoo.com Cc: "KICTAnet ICT Policy Discussions" <kictanet@lists.kictanet.or.ke> Date: Wednesday, January 19, 2011, 12:43 PM
Liko, In developed Markets where both data and voice have matured, you can afford drastic fall in price. When you get reports from the public, one must always be cautious. Take for example when someone reports that there is a likelihood of cross subsidy which can potentially affect the market. Should we be locking ourselves in the room and pray that nothing happens?
It is therefore not abnormal for the Government to be cautious especially when the public writes to complain of a similar situation elsewhere. We have not faulted any operator but it is our responsibility to ensure that there is fair play.
Imagine a situation where all the operators report losses at the end of the year. You will begin to see retrenchments, the stock market fall would trigger a rise both with the exchange rate and the interest rates effectively the consumer will end up paying somehow. I will not be suprised that it will be this same forum that will ask what the Government was doing to let things get this worse.
Therefore, it does not matter whether you you cricise the Government now or later. Either way we face the criticism.
Ndemo.
Guys.
How about we just let the prices go down till the govt has to set prices ? Or till the Govt supports MNO's (like posta and telkom for a loooooong time)
Seriously, the same peeps who were complaining about call costs 3 years are worried about the telcos collapsing.
This is the same language we heard when ISP's we asked to reduce bandwidth prices ...
Unsustainable :)
On 1/18/11, John Kieti <jkieti@gmail.com> wrote:
Hi Walu and other esteemed Kenyans,
This debate is interesting. As mentioned earlier by someone, the debate would be more enlightening if the cost structure of these MNOs had been in the public domain. But all is not lost; there are some basic parameters already in the public domain ie. (1) Safaricom's dominant position of about 77% market share and (2) Airtel's low price strategy including their 1 bob on-net offer in an attempt to eat into Safaricom's market share. It appears a little premature then to raise a concern of Anti-Trust against a non-dominant player, when they have not even achieved a half of the dominant player's market share.
The current cost structure and profit margins for voice, SMS and all other product offerings is what we really need to understand before going into any conclusion on long term sustainability. It seems easy to see that brand loyalty and patriotic sentiments are strong everywhere this debate comes up but it might also help to see these harder facts.
Lastly, in today's dynamic economic environment, one has to either innovate or die - and our dear Safaricom has demonstrated substantial competence on this. It then appears that innovation is what will sustain growth of the industry - really not regulation and protectionism.
Best regards
On Tue, Jan 18, 2011 at 6:09 PM, Walubengo J <jwalu@yahoo.com> wrote:
Harry, tough questions you have and the answers may most likely neutralize my argument. But the bigger point is/was that certain type of competitive tactics can be counterproductive when looked at from a Macro perspective. Yes, you (Airtel) wins todays battle, but someone bigger than Safcom will lose the war.
With the Microsoft Case- European Courts ruled that their tactic was anti-competitive and they were forced to seperate their Browser from their OS, rather than sell as a bundle. But I think it was a case of too little too late. Did internet numbers go down? probably not since Internet numbers do depend on more factors other than just Browsers.
But for the mobile industry, their growth and expanse does depend on revenues. I can forcasts that VOICE Revenue generated from all players might be the same as last year because the voice industry may not grow - it will simply be shared out.. And after the price-wars are over and an equilibrium is established (maybe Airtel 50% others 50%) it will dawn on everyone that they incoming revenue streams is insufficient to deliver expansion or extend the services outside their current levels.
walu.
--- On *Tue, 1/18/11, Harry Hare <harry@africanedevelopment.org>* wrote:
From: Harry Hare <harry@africanedevelopment.org> Subject: Re: [kictanet] [Skunkworks] Are we letting the PS get away with this too? To: "Walubengo J" <jwalu@yahoo.com>
Cc: "KICTAnet ICT Policy Discussions" <kictanet@lists.kictanet.or.ke> Date: Tuesday, January 18, 2011, 5:22 PM
Walu good analogy with Netscape and MS IE. However
1. Did the Internet die with the death of Netscape? 2. Did the Internet numbers stay constant with the death of Netscape? 3. Did Microsoft marketshare drop? 4. Did innovation on the internet stop?
Guys, let get real, this is business…natural selection comes into play.
Kindest Regards
Harry Hare Director * eDevelopment House : : 604 Limuru Road * Old Muthaiga : : P O Box 49475 00100 Nairobi : : Kenya T +254 20 3741646/7 : : C +254 725 650044
Training : : Research: :Consultancy: : Publishing
From: John Walubengo <jwalu@yahoo.com<http://mc/compose?to=jwalu@yahoo.com>
Date: Tue, 18 Jan 2011 05:35:58 -0800 (PST) To: Harry Hare <harry@africanedevelopment.org<http://mc/compose?to=harry@africanedevelopment.org>
Cc: KICTAnet ICT Policy Discussions <kictanet@lists.kictanet.or.ke<http://mc/compose?to=kictanet@lists.kictanet.or.ke>
Subject: Re: [kictanet] [Skunkworks] Are we letting the PS get away with this too?
Here are my thoughts.
The PS is right about predatory pricing never aimed at growing the Industry. For those who were "alive" at the beginning of the web-browser wars in early 1990s. Netscape was King. Then Microsoft came in and gave away its product Internet Explorer(IE) - for free. Everyone was happy - until they realized they were paying for the Microsoft IE through other means (by buying for the OS for example). But by then Netscape as a competitor was as dead as the Dodo. Microsoft Mission accomplished.
Folks, Airtel is not here because they love giving free things. I am not privy to their Strategy but it can be read by anyone. Their aim is not to grow/extend the Service, but rather to eat Safaricom's lunch. At a consumer level, nothing really wrong with that and infact it is Christmas time for consumers. BUT at a national level, what you have is that the 20million subscribers you currently have in the country, will remain 20million subscriber five years later. Only that half of them will be sitting on Airtel's network and the other half will be with "Others". Net growth for Kenya? =ZERO
Airtel's strategy wont kill the mobile industry, but believe you me, it will stiffle its growth in the long run, because the returns to the investors will not be sufficient to sustain operations, let alone extend the network or pay for innovation.
That said, as a consumer, Airtel's offer is truly irresistible and worth considering. But as a scholar, I do know, and agree that it is not good for the industry in the long run.
walu.
--- On *Tue, 1/18/11, Odhiambo Washington <odhiambo@gmail.com<http://mc/compose?to=odhiambo@gmail.com>
* wrote:
From: Odhiambo Washington <odhiambo@gmail.com<http://mc/compose?to=odhiambo@gmail.com>
Subject: Re: [kictanet] [Skunkworks] Are we letting the PS get away with this too? To: jwalu@yahoo.com <http://mc/compose?to=jwalu@yahoo.com>
Cc: "KICTAnet ICT Policy Discussions" <kictanet@lists.kictanet.or.ke<http://mc/compose?to=kictanet@lists.kictanet.or.ke>
Date: Tuesday, January 18, 2011, 1:22 PM
On Tue, Jan 18, 2011 at 1:18 PM, Barrack Otieno <otieno.barrack@gmail.com>wrote:
You have a point Brainiac, there are many factors in your argument which need to be tackled and as such we may need expert opinion on some issues, a corporate entity is treated as a person and as the saying goes one mans meat is another mans poison, what are the implications of certain moves on new market entrants? How will the other Telcos survive in the market?, this is where regulation comes in to ensure a piece of cake for everyone.
Before making this debate so complicated, is Airtel's move interpreted as a means towards crippling the mobile industry? Why is this position not being applied on the Internet Service Provision industry then? We always heard promises of "prices will come down" but when they do now, the govt is gonna lose revenue? Puleease!
-- Best regards, Odhiambo WASHINGTON, Nairobi,KE +254733744121/+254722743223 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Damn!!
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