[kictanet] MOBILE PRICE WARS COULD DERAIL NEW KATIBA - JOKE OF THE YEAR (Was Are we letting the PS get away with this too?)

Wed Jan 19 19:00:19 EAT 2011

On Wed, Jan 19, 2011 at 3:57 PM, Shem Ochuodho <shemochuodho at yahoo.com>wrote:

>  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
>
>

Just to add on to the debate, here is an analysis I have found interesting
that I could not resist sharing:

Article Source: *http://goo.gl/NUjFl*

Price Wars: Rates Are Sustainable, The Government is Neither Fair nor Honest
Posted by *Tech Mtaa* on January 19th, 2011
0 <http://www.google.com/buzz/post>
Share<http://www.facebook.com/sharer.php?u=http%3A%2F%2Fwww.techmtaa.com%2F2011%2F01%2F19%2Fprice-wars-rates-are-sustainable-the-government-is-neither-fair-nor-honest%2F&t=Price%20Wars%3A%20Rates%20Are%20Sustainable%2C%20The%20Government%20is%20Neither%20Fair%20nor%20Honest%20%7C%20Tech%20Mtaa&src=sp>
Once again the Government appears to be taking sides in the wars between
Telecom companies.

 From ongoing media reports, it appears that the Government favours
Safaricom over Airtel. This is not surprising in view of Government
shareholding stake in Safaricom. It appears that the Government is at
crossroads: Does it defend its investment in Safaricom and therefore use its
might to stifle competition or does it take the noble route and do what is
best for the consuming public.

 Businessmen are rational beings and it is hard to believe the spin that
Airtel’s prices are not sustainable. Airtel consistently says that its
business model involves a low cost structure which is achieved by
outsourcing non-core functions to experts. The IBM outsourcing transaction
was widely reported in the media. Since profits are a function of revenues
and costs, it is not surprising to see where Airtel is headed.  Airtel has
gotten rid of its inefficiencies through outsourcing.  It is also attracting
customers to it network using sweeteners like the 1 bob on net price and the
3 bob across all networks.  Reduced costs (through outsourcing) and high
revenues (increased subscribers, increased traffic) = profit.

 The story that the current prices are not sustainable is therefore just a
carefully woven spin by those who want prices to remain high so that they
can continue to reap “supernormal” profits at the expense of the consuming
public or to justify their failure as the case may be.

 Times[image: Times
reviews]<http://www.blippr.com/music/songs/470044-Times>have changed
and the consuming public is wiser and operating firms that are
not efficient and want to pass those inefficiencies to consumers will not be
able to do so and hence the hue and cry by Safaricom and Orange[image:
Orange reviews] <http://www.blippr.com/music/songs/542470-Orange>. In the
present circumstances they must review their business models to survive and
typically these organizations are resisting change.

 The 1 bob promo is a welcome relief for Kenyans who are reeling from the
after effects of spending on Christmas and the shock of the expenses
required by kids going back to school. Airtel should be honored and not
vilified as is the case.
The Government is blaming Airtel for KRA’S failure to meet its revenue
target. KRA is lucky to have such an easy scape goat. Does the government
actually believe this? Where are the hard facts? Where is the evidence?
Airtel should share the experience of India[image: India
reviews]<http://www.blippr.com/music/songs/497408-India>.
How has the low pricing structure in India impacted the economy of India?
Most certainly, the impact has not been negative.

 The CCK a government body has been saying that the high cost of
telecommunication services has been a hindrance to the uptake of
telecommunication services. It has also said that the prevalence of
telecommunication services would spur economic growth because communication
is essential to business. Has the Government changed its stand?
Does the Government not believe in a free market anymore? What Safaricom and
Orange are actually asking for is protection from their competitors.
Government should actually get out of these businesses while it still can
and leave the market to those who can weather the storms of business.

 Now Safaricom is asking the Government to raise the interconnection rates
so that prices can be adjusted upwards.  And the Government is listening?
They are also asking that the Government sets a minimum price for
telecommunication services so that Airtel can be gagged from surprising
customers with goodies from time to time. If ever there was a retrogressive
step, this is one.

 Government is meant to be a fair competition arbiter in the fight and not
take sides as it has clearly done if the statements attributed to the PS
Ministry of Information[image: Information
reviews]<http://www.blippr.com/music/songs/476433-Information>and
Communication[image: Communication
reviews]<http://www.blippr.com/music/songs/376616-Communication>in the
Nation[image: Nation reviews] <http://www.blippr.com/books/98097-Nation> are
true.
Kenyan’s can also clearly remember that the Government scuttled the Fair
Competition Regulations (developed by the Minister after consultation with
CCK) because Safaricom did not want to be regulated for its anti –
competitive behavior. Perhaps if the Government had not taken sides at the
time the market would not be experiencing the price wars.

 Monopolies are a bad thing whether they are owned by Government or by
private investors. Competition[image: Competition
reviews]<http://www.blippr.com/music/songs/407587-Competition>laws
should be applied impartially and the aim should be to maximize
consumer welfare and benefit.
Right now the customer is king and is enjoying easy communication after
years of bondage to high prices. The Government should not spoil the party
by insisting that operators should not below a fixed floor. Where is
Kenya[image:
Kenya reviews] <http://www.blippr.com/music/albums/476431-Kenya> headed?

nce again the Government appears to be taking sides in the wars between
Telecom companies.
>From ongoing media reports, it appears that the Government favours Safaricom
over Airtel. This is not surprising in view of Government shareholding stake
in Safaricom. It appears that the Government is at crossroads: Does it
defend its investment in Safaricom and therefore use its might to stifle
competition or does it take the noble route and do what is best for the
consuming public.

Businessmen are rational beings and it is hard to believe the spin that
Airtel’s prices are not sustainable. Airtel consistently says that its
business model involves a low cost structure which is achieved by
outsourcing non-core functions to experts. The IBM outsourcing transaction
was widely reported in the media. Since profits are a function of revenues
and costs, it is not surprising to see where Airtel is headed.  Airtel has
gotten rid of its inefficiencies through outsourcing.  It is also attracting
customers to it network using sweeteners like the 1 bob on net price and the
3 bob across all networks.  Reduced costs (through outsourcing) and high
revenues (increased subscribers, increased traffic) = profit.

The story that the current prices are not sustainable is therefore just a
carefully woven spin by those who want prices to remain high so that they
can continue to reap “supernormal” profits at the expense of the consuming
public or to justify their failure as the case may be.

Times have changed and the consuming public is wiser and operating firms
that are not efficient and want to pass those inefficiencies to consumers
will not be able to do so and hence the hue and cry by Safaricom and Orange.
In the present circumstances they must review their business models to
survive and typically these organizations are resisting change.

The 1 bob promo is a welcome relief for Kenyans who are reeling from the
after effects of spending on Christmas and the shock of the expenses
required by kids going back to school. Airtel should be honored and not
vilified as is the case.
The Government is blaming Airtel for KRA’S failure to meet its revenue
target. KRA is lucky to have such an easy scape goat. Does the government
actually believe this? Where are the hard facts? Where is the evidence?
Airtel should share the experience of India. How has the low pricing
structure in India impacted the economy of India? Most certainly, the impact
has not been negative.

The CCK a government body has been saying that the high cost of
telecommunication services has been a hindrance to the uptake of
telecommunication services. It has also said that the prevalence of
telecommunication services would spur economic growth because communication
is essential to business. Has the Government changed its stand?
Does the Government not believe in a free market anymore? What Safaricom and
Orange are actually asking for is protection from their competitors.
Government should actually get out of these businesses while it still can
and leave the market to those who can weather the storms of business.

Now Safaricom is asking the Government to raise the interconnection rates so
that prices can be adjusted upwards.  And the Government is listening? They
are also asking that the Government sets a minimum price for
telecommunication services so that Airtel can be gagged from surprising
customers with goodies from time to time. If ever there was a retrogressive
step, this is one.

Government is meant to be a fair competition arbiter in the fight and not
take sides as it has clearly done if the statements attributed to the PS
Ministry of Information and Communication in the Nation are true.
Kenyan’s can also clearly remember that the Government scuttled the Fair
Competition Regulations (developed by the Minister after consultation with
CCK) because Safaricom did not want to be regulated for its anti –
competitive behavior. Perhaps if the Government had not taken sides at the
time the market would not be experiencing the price wars.

Monopolies are a bad thing whether they are owned by Government or by
private investors. Competition laws should be applied impartially and the
aim should be to maximize consumer welfare and benefit.
Right now the customer is king and is enjoying easy communication after
years of bondage to high prices. The Government should not spoil the party
by insisting that operators should not below a fixed floor. Where is Kenya
headed?

-- 
Best regards,
Odhiambo WASHINGTON,
Nairobi,KE
+254733744121/+254722743223
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Damn!!
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