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

Thu Jan 20 11:44:38 EAT 2011

Barack, I have not seen any personalized or politicized debate targeting the PS. Personally as someone who views PS Dr. Ndemo as a National Hero, I am deeply saddened by your statement. The issues raised in the debate are very important and if you check today's Daily Nation page 27, MoIC and CCK basically agree with our arguments. If there was any attack on the PS then I disassociate myself from it.
Leonard

--- On Wed, 1/19/11, Barrack Otieno <otieno.barrack at gmail.com> wrote:

From: Barrack Otieno <otieno.barrack at gmail.com>
Subject: Re: [kictanet] [ke-internetusers] Fw: [NVK-Mageuzi] Re: MOBILE PRICE WARS COULD DERAIL NEW KATIBA - JOKE OF THE YEAR (Was Are we letting the PS get away with this too?)
To: mleonardo at yahoo.com
Cc: "Ke Internet Users" <ke-internetusers at bdix.net>, "KICTAnet ICT Policy Discussions" <kictanet at lists.kictanet.or.ke>
Date: Wednesday, January 19, 2011, 10:06 PM

Well Listers i suggest we move away from a personalised (political :-)) debate targeted at the PS and tackle the issues that have been raised in the article soberly, i have picked some excerpts from the article posted by Shem. Could we also comment on the comments attributed to Michael Ghossein (TKL) and Mr. Peter Wanyonyi?

Regards

“We have asked CCK (industry regulator Communications Commission of Kenya) to evaluate if this kind of pricing is sustainable,” Dr Ndemo said on Monday.
“I am not opposed to reduced prices but they have to make business sense,” he said. “Competition has to take care of re-investment in the sector as well as shareholder value.”

Orange Kenya CEO Mickael Ghossein said on Monday that the future of the industry’s profitability appears grim should the current price wars be allowed to prevail.

“There has not been largely significant increase in the traffic across networks that would indicate that the low pricing model offered by the competition has resulted in massive recruitments. In any case, cannibalisation of another player’s market share cannot be considered as industry growth,” Mr Ghossein said.

“Operators will see little justification in improving call and related quality when profits are falling under assault from Airtel’s strategy.

“Improving service quality requires investment in new infrastructure, but with ever-reducing revenues, this will not happen,” warns Mr Peter Wanyonyi, a telecoms analyst.

But India’s Bharti Airtel-owned Kenyan subsidiary has defended its decision.

On Wed, Jan 19, 2011 at 5:16 PM, Shem Ochuodho <shemochuodho at yahoo.com> wrote:

Fyi

Sorry, I forgot to include the "Nation" site with the full story (for those who might have missed it):- http://www.nation.co.ke/business/news/PS%20fears%20mobile%20phone%20price%20wars%20could%20derail%20new%20Constitution/-/1006/1091554/-/wnxn0ez/-/index.html.

Happy reading.
Shem

 Shem J. Ochuodho, MSc (Eng), PhD, LLD (Hon)
Senior Advisor
Ministry of Telecom & Postal Services
Government of Southern Sudan (GoSS), Juba
Commonwealth Telecom Organization (CTO/GoSS) 2010 African Internaut Award Recipient
Kenya Community Abroad (KCA) 2006/07 Excellence Award Winner
AfricaOnline 2005 Industry Pioneer Award Recipient
Father of Internet in Kenya (CSK 2000)
Cell: +249-955-021-040/+256-477-232025/+254-734-137371
Skype: shem.ochuodho

From: Shem Ochuodho <shemochuodho at yahoo.com>
To: Leonard Mware <mleonardo at yahoo.com>; KICTAnet ICT Policy Discussions <kictanet at lists.kictanet.or.ke>; NVK-Mageuzi Members List <NVK-Mageuzi at yahoogroups.com>
Cc: PICTA Kenya-LIst <picta-kenya at yahoogroups.com>; NYCIV Group <nyciv at googlegroups.com>; ProgressiveMinds <ProgressiveMinds at yahoogroups.com>; Madaraka Party <madaraka-kenya at yahoogroups.com>
Sent: Wed, 19 January, 2011 15:57:28
Subject: [NVK-Mageuzi] Re: MOBILE PRICE WARS COULD DERAIL NEW KATIBA - JOKE OF THE YEAR (Was Are we letting the PS get away with this too?)

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 at yahoo.com>
To: shemochuodho at yahoo.com
Cc: KICTAnet ICT Policy Discussions <kictanet at 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 at jambo.co.ke <bitange at jambo.co.ke> wrote:

From: bitange at jambo.co.ke <bitange at jambo.co.ke>
Subject: Re: [kictanet] Are we letting the PS get away with this too?
To: mleonardo at yahoo.com
Cc: "KICTAnet ICT Policy Discussions" <kictanet at 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 at 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 at 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 at africanedevelopment.org>*
>>> wrote:
>>>
>>>
>>> From: Harry Hare <harry at africanedevelopment.org>
>>> Subject: Re: [kictanet] [Skunkworks] Are we letting the PS get away
>>> with
>>> this too?
>>> To: "Walubengo J" <jwalu at yahoo.com>
>>>
>>> Cc: "KICTAnet ICT Policy Discussions" <kictanet at 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 at yahoo.com<http://mc/compose?to=jwalu@yahoo.com>
>>> >
>>> Date: Tue, 18 Jan 2011 05:35:58 -0800 (PST)
>>> To: Harry Hare
>>> <harry at africanedevelopment.org<http://mc/compose?to=harry@africanedevelopment.org>
>>> >
>>>
>>> Cc: KICTAnet ICT Policy Discussions
>>> <kictanet at 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 at gmail.com<http://mc/compose?to=odhiambo@gmail.com>
>>> >* wrote:
>>>
>>>
>>> From: Odhiambo Washington
>>> <odhiambo at 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 at yahoo.com <http://mc/compose?to=jwalu@yahoo.com>
>>>
>>> Cc: "KICTAnet ICT Policy Discussions"
>>> <kictanet at 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 at 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!!
>>>
>>>
>>> -----Inline Attachment Follows-----
>>>
>>> _______________________________________________
>>>
>>>
>>
>>
>> --
>> My Blog - www.gmeltdown.com
>> '''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''
>> Keep on doing what you know is right ...
>>
>
> --

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