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The East African : February 10th 2014
32 The EastAfrican OUTLOOK FEBRUARY 8-14,2014 e -AF R ICAN Africa’s state owned telcos keep prices high, slow market growth These incumbent telcos stand in the way of developing a count≥y’s economy By RUSSELL SOUTHWOOD Special Correspondent strides over the past decade in developing their telecoms markets, it is easy to forget that the majority have stuck with the old monopoly incumbents. These state owned compa- W nies have kept prices high for customers and stalled the modernisation of many African economies. A decade ago, fierce battles were fought to get a number of Africa’s state-owned telcos into private hands and strip them of their monopoly privileges. This happened in all but two of what are now sub-Saharan Africa’s most successful economies: Ethiopia and Tanzania. These state-owned incum- bent telcos stand in the way of developing a country’s economy for a number of reasons. They are poorly run and the quality of infrastructure and service they provide is substandard. Because they are monopolies, they keep prices high for other players in the market: Places like Angola, Cameroon, Ethiopia and Djibouti have some of the highest international and national wholesale and retail prices on the continent. Because they are owned by fi- nancially cash-strapped governments, they are under-invested in and wages for their employees are often late. Chinese loans have helped with underinvestment but cannot deal with the other problems identified here. Incumbents are significantly overstaffed and under-skilled. Hardly any one of them has a business strategy that is worth the paper it is printed on. The easiest part of the Gord- ian knot at the heart of the divestment problem is that governments protect them because they fear what will happen if there are wide-scale redundancies. In places like Mali, when there was more competition from Orange, the government owned Sotelma lost customers quickly and they largely stayed lost. However, governments like Kenya and Ghana that bit the bullet on this issue lived to see another day. Some like Nigeria have made such a mess of the process that they have lost most of whatever the value might There are countries with a state owned telco that is either dominant or has monopoly privileges. hile many African countries have made huge BRIEFS Uganda, Kenya startups win Microsoft funding Uganda and Kenya based technology solutions providers are among the five startups that have won the Microsoft funding in the 4Afrika initiative. Access.mobile LLC (Uganda) Africa 118 (Kenya) a mobile directory services and Kytabu (Kenya), a textbook leasing application for low-cost tablet providers will be allowed to utilise Microsoft’s data platform solutions, unified communications, optimised desktops and enterprise project management to boost their operations. They were selected based on the uniqueness and scalability of their solutions, their business models and the relevance of the key problems they are addressing. Rwanda starts gigital migration process The Kenya government sold its shares in TelKom Kenya to Orange. Picture: File have been of the assets of Nitel. Others like Niger and Zambia privatised only to see the collapse of Lap Green during the Libyan civil war meaning that they had to re-nationalise. Zambia has held on to Zamtel because a new government felt that the previous deal to sell was not at a fair price. Politicians have a nasty habit of treating these telcos as cash tills that can be dipped into, particularly at election time. In the case of Swaziland, the ownership is directly held by the King: why he should sell it off in those circumstances? Where corrupt money is not involved, patronage has gone a long way to help wreck what efficiency may notionally exist. African politicians would like to persuade us that state telcos are a key part of closing the digital divide and joining the information age. But just because the rhetoric is warming and positive in intent it does not mean that we should believe them. One of the key issues in Af- rican telecoms liberalisation has been the way that state monopoly incumbents hold up the development of a more complex, higher skilled market. If the incumbent sells wholesale capacity to local ISPs, you can be sure that its employees are going to those ISP customers and trying INEFFICIENCY: They are poorly run and the quality of infrastructure and service they provide is sub-standard. MONOPOLIES: Because they are monopolies, they keep prices high for other players in the market: Places like Angola, Cameroon, Ethiopia and Djibouti have some of the highest international, national wholesale and retail prices on to poach them. Furthermore, these kinds of state companies have no idea of the cost of providing wholesale capacity for two reasons: First, they lack the commercial ability to work it out and second, there is no benchmark price in the market. To tackle this problem, a number of Governments have taken the sensible step of separating wholesale and retail functions. Ghana Telecom was sold on the basis that this had to occur and it has worked. Botswana has done the same with BTC while holding on to both parts. Also the World Bank has helped finance operator consortia to eat away at the more egregious of these monopoly privileges like landing stations and national networks (as in Burundi). There are 31 countries with a state owned incumbent telco that is either dominant or has monopoly privileges that hamper the growth and efficiency of the market. Several of these countries are in political turmoil that makes it imposible to do anything about privatising the incumbent telco. Others like Comores are going through the privatisation loop again. Privatising a state owned telco in the African context is about a government making a commitment to having an effi- DISADVANTAGES OF INCUMBENT TELECOMS the continent UNDERINVESTED IN: Because they are owned by cash-strapped governments, they are under-invested in and wages for their employees are often late. EMPLOYEES: Incumbents are significantly overstaffed and underskilled. cient economy that will produce sustainable jobs. Telcos should be privatised include those in Ethiopia, Mozambique, Namibia and Zimbabwe. Ethiopia is the North Korea of telecoms regulatory practice and maintains that what is now called EthioTelecom plays a crucial role in closing the digital divide. Its equipment and network procurement has been a mess and even with Chinese loans, it is still serving fewer customers than it might if it were in private hands. Prices remain high and mar- ket development was not helped by things like the ban on SMS texts for several years. It remains, more or less, the only company in the market whereas other more open economies have seen jobs and skills flourish. Eritrea is the only telco without an international fibre landing station or any plans to build one. Mozambique’s state telco is currently going through a phase of talking about privatising but don’t hold your breathe. Incumbent telco TDM retains a number of monopoly market privileges and charges neighbouring countries high transit prices for access to international fibre capacity. In Cameroon, there was one attempt to privatise Camtel and either the government didn’t like the price or no-one came to the party. Despite the huge amount of pride some Cameroonians still have in Camtel, it is also hugely inefficient and its monopoly control of both the landing station and national fibre networks mean prices are higher than they should be. The writer is the CEO Balancing Act, a consultancy and research company focused on telecoms, Internet and broadcast in Africa Analog switch off in Rwanda kicked of on January 31 with 30,000 television sets being affected, according to Rwanda Utilities and Regulatory Authority officials. The districts of Gasabo, Nyarugenge and Kicukiro in Kigali were among those affected. Others were Muhanga, Rulindo, Kayonza, Kamonyi, Rwamagana and Bugesera. The migration process will be done progressively until July 31 with the next switch off slated for March 31 targeting Mugogo, Rubona and Gitwe. Dar urged to withdraw Bharti stake in TTCL Airtel owns 35pc of TTCL. Pic:File Tanzania is under pressure to take back the 35 per cent stake that Bharti Airtel owns in Tanzania Telecommunication Company Limited (TTCL), to give the government full control of the company’s operations. The Parliamentary Committee on Infrastructure said that Bharti Airtel has failed to develop TTLC in accordance with the agreement. TTLC faces huge financial problem, blamed on poor servicing of debts. New body to administer Kenya Internet domain Management of Kenya’s .ke domain registry could be up for grabs after the Communication Authority of Kenya (CAK) distanced itself from the current management, setting the stage for licensing of a new body that will manage and administer the country’s Internet addresses system. According to Francis Wangusi, director general of CAK, the authority cannot be on the board and at the same time play its oversight role.
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