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
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:
|