[kictanet] Call for opinions - CCK vs Safaricom
muriuki mureithi
mureithi at summitstrategies.co.ke
Fri May 7 20:07:34 EAT 2010
Just checking my old notes for context on how we came to where we are -
and how we can get out!!
Kencell was awarded a licence to operate on 23/1/2000 while Safaricom
under Vodafone management took over on 20/7/2000. Both operators launched
their operations on 24/8/2000 ( Kencell) and 21/10/2000 ( Safaricom) and by
dec 2000 , Kencell had 39300 customers while Safaricom was far behind at
29100 customers . Safaricom was the smallest player in the market! Indeed
the situation did not change immediately and by march 2001 kencell was still
leading at 126000 against Safaricom’s 93700. At the time, Telkom had
seemingly unassailable lead of 300000 controlling 60% market share with
Safaricom trailing the pack. By June however, things starting changing
with the last overtaking both by the end of year and positions reversed
- it seems forever. Note that at the time , TKL could not change its
tariffs without authority from CCK as the incumbent dominant player not to
‘kill’ the nascent players. The cellular operators needed only to file
their tariffs with CCK
While Safaricom took off behind Kencell by 3 months it had 17000
customers on its list inherited from TKL, it also had some goodies by
virtue of its closeness to TKL – interconnection, access to tkl property to
build cellsites etc. these however cannot account for its growth today. It
is a question of strategies both companies took –one focused on the high
value niche market emphasising post-paid requiring PIN certificates those
days , the other focused on the mass market with tools like per second
billing, no charge on customer number etc. branding , level of investment
and consistent brand . these were a major differentiator and all have
contributed to make the difference we see today. While we are very price
conscious , there are many other elements built around of the network we
chose and affect the decision of choice . last year for example the
networks invested 41% of their revenues for network expansion. This is a
massive investment and certainly biggest investor must expert to get the
most out of its investment. the new operators tried to fight on price
alone but certainly that did not dent the market shares and in a
market where 99% of the market is pre paid and can vote with their legs
and churn with least effort with or without MNP.
So, are regulatory tools based on tariffs adequate to reign-in market
dominance as proposed in the regulations? NO. it cannot account for the
investment, strategies , innovation and risk taken by the dominant
player. Equally , it does not jerk up the smallest players either.
Strategies define who dominates or lose . The incumbent cellular operators
in Tanzania and Ghana collapsed when new operators came to the market , MTN
Uganda on its launch registered more customers on day one than the incumbent
Celtel. We need tools that really jerk up those behind to really
exploit the national resource ( spectrum etc ) they are holding
It’s true that dominant players can easily use their might to squeeze
smaller ones out of the market with disastrous long term consequences to the
consumer and the market . Tariffs is not the only tool available to an
operator. We should not forget the wide range of services operators
launch to increase stickiness to its services . The government and by
extension CCK has a duty to protect the consumers and having chosen
competition as a foundation to customer protection and choice in the
National ICT Policy , it must safeguard the competition process. A starting
point is clear boundary that defines when competition fuses into abuse
and at a higher level when market failure affects competition.
Cheers
MM
From: kictanet-bounces+mureithi=summitstrategies.co.ke at lists.kictanet.or.ke
[mailto:kictanet-bounces+mureithi=summitstrategies.co.ke at lists.kictanet.or.k
e] On Behalf Of Andrea Bohnstedt
Sent: 07 May 2010 18:28
To: mureithi at summitstrategies.co.ke
Cc: KICTAnet ICT Policy Discussions
Subject: Re: [kictanet] {Disarmed} RE: {Disarmed} Re: Call for opinions -
CCK vs Safaricom
I think there are several interesting points here:
* Yes, a regulator should keep an eye on monopolistic and
oligopolistic developments. But, as Michael Joseph said, dominance should
only be penalised if abused, and in order to do so, this abuse needs to be
defined in the regulations - which has not been done, he says, despite
repeat reassurances given to him by both the Ministry of Information and the
CCK (see
http://www.ratio-magazine.com/201005052971/Kenya/Kenya-Safaricom-Willing-to-
Sue-Against-New-Tariff-Regulations.html)
* Celtel/Zain clearly didn't start out to be a 'feeble player', nor
were they a late entrant, as the figures I cited show. So is it fair to
penalise Safaricom for Celtel's inability to retain market share and
capitalise on having been in the market for more than a decade?
* Orange: France Telecom bid around USD100m more for Telkom Kenya than
their nearest competitor in the privatisation. Was that price justified?
Nobody else seems to think so, not even France Telecom anymore, since they
are now reportedly trying to get some or all of that money back.
* Yu: Econet couldn't get going for ages because their local partner
could raise their financial contribution. Was that a sensibly chosen local
partner?
Obviously it's not ideal for the market and customers to have such limited
competition, but then a) the regulation lacks a crucial element, and b) the
competition seem to have been quite adept at shooting themselves in the
foot. Is it fair to punish Safaricom for that?
Andrea
On 7 May 2010 18:04, Pius Walela <PWalela at strathmore.edu> wrote:
Recent developments in the mobile telephony sector are of concern . I
opine that for a true capitalist society to manifest the market should be
subject to forces of demand and supply to create conducive conditions
for the market to thrive and in extension to ensure its longevity.
However Oligopolistic and monopolistic tendencies in the market ought
to be constrained to cushion feeble players and potential new entrants
from eventual or outright failure, as such regulation is essential
however these regulations have to be moderated.
From: kictanet-bounces+pwalela=strathmore.edu at lists.kictanet.or.ke
[mailto:kictanet-bounces+pwalela <mailto:kictanet-bounces%2Bpwalela>
=strathmore.edu at lists.kictanet.or.ke] On Behalf Of Andrea Bohnstedt
Sent: Friday, May 07, 2010 5:57 PM
To: Pius Walela
Cc: KICTAnet ICT Policy Discussions
Subject: {Disarmed} Re: [kictanet] Call for opinions - CCK vs Safaricom
Amusing little factoid:
In 2004, when Celtel acquired Kencell:
'Kencell, with about 1.2 million subscribers, has recently lost market share
to rival Safaricom, a joint venture of Kenya's state-owned Telkom Kenya and
Britain's Vodafone. Safaricom's subscribers have grown to 1.8 million,
increasing its share to 60% from about 50%.
So Celtel/Zain managed to work their way down from 50% to 14% or so over the
past six years. Must have been quite a slippery playing field.
(http://www.regulateonline.org/2003/intelecon/2004/May/A-Kenya-040525.htm)
On 7 May 2010 17:38, Walubengo J <jwalu at yahoo.com> wrote:
MM,
this Kwame guy is an interesting read!. One amusing message I picked says
that the regulator should be protecting consumers - not competitors ;-)
..and from the "streets" some analyst said that Safcom may have exploited
its dominance position; but that was in the beginning (ref: interconnection
tariff wars with Kencell 6-8yrs ago). Currently, it will be a tall order to
get evidence of the yet to be defined "exploiting" dominance postion"
walu.
--- On Fri, 5/7/10, muriuki mureithi <mureithi at summitstrategies.co.ke>
wrote:
From: muriuki mureithi <mureithi at summitstrategies.co.ke>
Subject: Re: [kictanet] [ke-internetusers] {HIJACK} Call for opinions - CCK
vs Safaricom
To: jwalu at yahoo.com
Cc: "'KICTAnet ICT Policy Discussions'" <kictanet at lists.kictanet.or.ke>,
"'ke-users'" <ke-internetusers at bdix.net>
Date: Friday, May 7, 2010, 3:32 PM
Kui
For a local context from an economic perspective , read the attached
Regards
Muriuki Mureithi
From: kictanet-bounces+mureithi=summitstrategies.co.ke at lists.kictanet.or.ke
[mailto:kictanet-bounces+mureithi <mailto:kictanet-bounces%2Bmureithi>
=summitstrategies.co.ke at lists.kictanet.or.ke] On Behalf Of John Kariuki
Sent: 07 May 2010 08:09
To: mureithi at summitstrategies.co.ke
Cc: KICTAnet ICT Policy Discussions; ke-users
Subject: Re: [kictanet] [ke-internetusers] {HIJACK} Call for opinions - CCK
vs Safaricom
Kui,
For some background information on Competition, Dominance,etc you could
check on the following information resources which should be available
on-line:
1.Oftel, January 2000- The application of the Competition Act in
Telecommunications Sector.
2. INTUG - Anti-Competitive Conduct and Competition Policy in
Telecommunications,ITU,Geneva 22 Nov.2002
3.EU Directive 2002/19/EC 0f 7/3/2002 (Access Directive)
4. European Court of Justice in " United Brands v. Commission(1978) ECR. 207
5.Telecommunication Regulation Handbook(Module 5 - Competition Policy) by
INFODEV,
Good Luck,
John Kariuki
--- On Thu, 6/5/10, Marie-Anne Kinyanjui <mkinyanjui at nation.co.ke> wrote:
From: Marie-Anne Kinyanjui <mkinyanjui at nation.co.ke>
Subject: [ke-internetusers] {HIJACK} Call for opinions - CCK vs Safaricom
To: "McTim" <dogwallah at gmail.com>
Cc: "KICTAnet ICT Policy Discussions" <kictanet at lists.kictanet.or.ke>,
"ke-users" <ke-internetusers at bdix.net>
Date: Thursday, 6 May, 2010, 8:47
Is there anyone on the list with a firm grasp of the industry (and who is
not directly involved :-) who is wiling to offer their objective views on
this subject for publication in Business Daily?
400-600 words please.
Thanks.
Kui Kinyanjui
Business Daily
-----Original Message-----
From: kictanet-bounces+mkinyanjui=nation.co.ke at lists.kictanet.or.ke
[mailto:kictanet-bounces+mkinyanjui <mailto:kictanet-bounces%2Bmkinyanjui>
=nation.co.ke at lists.kictanet.or.ke] On Behalf Of McTim
Sent: Thursday, May 06, 2010 8:15 AM
To: Marie-Anne Kinyanjui
Cc: KICTAnet ICT Policy Discussions; ke-users; Angela Nganga- Mumo
Subject: Re: [kictanet] [ke-internetusers] Re: {Disarmed} Re: CCK vs
Safaricom?- and now Safcom vs the Rest?
On Thu, May 6, 2010 at 7:35 AM, Solomon Mburu Kamau
<solo.mburu at gmail.com> wrote:
> This is great Angela.
> I really need to know why the 'big boy' is suddenly crying foul.
Let's re-examine our assumptions of who the "Big Boy" in the Kenyan
Telecommunications market is.
The GoK owns a huge minority shareholding in Telkom.Orange (and may in
future own a majority share). When Orange makes a profit, so do its
owners.
The GoK owns a huge minority shareholding in Safaricom. When SafCom
makes a profit, so do its owners.
The GoK collects a tremendous amount of VAT and other taxes from the
telecoms market players.
The GoK collects a tremendous amount of license fees and frequencies
fees from the telecoms market players.
The GoK sets policy via the CCK and the Ministry.
So from my POV, the GoK is the BIG BOY, it seems to me that this is
the "elephant in the room" that no one is talking about.
In any case on this specific regulation, I applaud the intent of
creating a level playing field. However, I see no monetary "teeth" or
enforcement measures (read fines) in this single doc (I have yet to
read the others).
My main objection is the 25% rule. My reading of this is that there
MUST always be at least one dominant provider. Let me use a poker
game analogy to make my point. Before the first hand is dealt, all
players will have an equal amount of chips. After the first hand (and
subsequent hands) there will (most likely) be a "chip leader" and a
"short stack". It is not likely that there will ever be equilibrium
in the game (or in the telecoms market).
I would suggest that this clause is not helpful, at least at the 25%
value at which the trigger is now set.
No wonder Safaricom is complaining.
--
Cheers,
McTim
"A name indicates what we seek. An address indicates where it is. A
route indicates how we get there." Jon Postel
>
> On 06/05/2010, Carole K <mhariricarole at gmail.com> wrote:
>> Thank you Angela, you are a star! The rest of us can now be informed
about
>> this new "unfair" regulation.
>>
>> CK
>>
>> On Wed, May 5, 2010 at 7:51 PM, Angela Nganga- Mumo <
>> anganga at orange-tkl.co.ke> wrote:
>>
>>> Dear All,
>>>
>>> Please find a PDF copy of the regulations.
>>>
>>> Regards,
>>>
>>> logo2
>>>
>>>
>>>
>>> Angela Ng'ang'a - Mumo
>>>
>>> Head of Corporate Communications
>>>
>>> Landline: + 254 20 3232011
>>>
>>> Orange Fixed Plus : +254 20 2454233
>>>
>>> Orange Mobile: +254 772 548 066
>>>
>>> Email : anganga at orange-tkl.co.ke
>>>
>>> cid:image003.jpg at 01C9FEEE.6AAFAFA0
>>>
>>>
>>> -----Original Message-----
>>> From: ke-internetusers-bounces at bdix.net
>>> [mailto:ke-internetusers-bounces at bdix.net] On Behalf Of
>>> bitange at jambo.co.ke
>>> Sent: Wednesday, May 05, 2010 7:41 PM
>>> To: Andrea Bohnstedt
>>> Cc: KICTAnet ICT Policy Discussions; ke-users
>>> Subject: [ke-internetusers] Re: {Disarmed} Re: [kictanet] CCK vs
>>> Safaricom?- and now Safcom vs the Rest?
>>>
>>> Will send it tomorrow.
>>>
>>>
>>> Ndemo.
>>>
>>>
>>> > I'd like to see the text, too. Dr Ndemo, could you or one of your
>>> > colleagues
>>> > email round a pdf with the regulations, please? Easier and a bit nicer
>>> on
>>> > the environment than all of us running downtown to buy paper copies.
>>> >
>>> > Thanks, Andrea
>>> >
>>> > On 4 May 2010 09:32, Walubengo J <jwalu at yahoo.com> wrote:
>>> >
>>> >> the drama continues,
>>> >>
>>> >> in a louder paid-up advert in today's press Yu, Orange and Zain
>>> support
>>> >> the
>>> >> CCK regulations and dispute yesterday's Safcom's complaint. All
>>> these
>>> >> without the public (or is it me?) not having copies of what they are
>>> >> arguing
>>> >> about!
>>> >>
>>> >> Someone told me the copies of this regulations are available at the
>>> >> Government Printers at a small fee. Halloo? Assuming I leave in
>>> >> Lokichoggio, Should i spend two days on the road to come and pickup
>>> some
>>> >> hard-copy regulations that should be downloadable?
>>> >>
>>> >> Sergon, can you help me, where does this leave you with your
>>> eGovernment
>>> >> stories?
>>> >>
>>> >> walu.
>>> >>
>>> >> --- On *Mon, 5/3/10, Walubengo J <jwalu at yahoo.com>* wrote:
>>> >>
>>> >>
>>> >> From: Walubengo J <jwalu at yahoo.com>
>>> >> Subject: Re: [kictanet] CCK vs Safaricom?
>>> >> To: jwalu at yahoo.com
>>> >> Cc: "KICTAnet ICT Policy Discussions" <kictanet at lists.kictanet.or.ke>
>>> >> Date: Monday, May 3, 2010, 10:55 AM
>>> >>
>>> >> Just seen a loud complaint from Safcom in today's Daily Nation. They
>>> >> quoted four regulations that have been gazetted and I have searched
>>> >> www.cck.go.ke to get a mouse on them but failed.
>>> >>
>>> >> Anybody with e-copies on these regulations or specific url can plse
>>> >> update.
>>> >>
>>> >> walu.
>>> >>
>>> >>
>>> >>
>>> >>
>>> >> -----Inline Attachment Follows-----
>>> >>
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>>> >
>>> >
>>> > --
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>>> > Publisher
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>>
>
>
> --
> Solomon Mbũrũ Kamau
> P.O. Box 19343 - 00202 Nairobi
> Cell: (+254-0) 735 431041
>
> Man is a gregarious animal and enjoys agreement as cows will graze all
> the same way to the side of a hill!
>
> AND
>
> It is better to die in dignity than in the ignomity of ambiguous
generosity!
>
> http://smiley2.wordpress.com
> http://mburu.sikika.co.ke
>
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--
Cheers,
McTim
"A name indicates what we seek. An address indicates where it is. A
route indicates how we get there." Jon Postel
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