[kictanet] Orange and yu exit: Market Failure or Creative Destruction (Capitalism Style)?

Wed Mar 26 10:14:33 EAT 2014

A similar problem arose in the US, but the regulator refused to let AT&T
(the leading operator) buy off T-Mobile(the fourth operator).

What happened is that T-Mobile got a bit more creative in its offers (
http://www.nytimes.com/2014/02/27/technology/personaltech/t-mobile-turns-an-industry-on-its-ear-in-a-fight-for-its-life.html?_r=0)
.

I also think that Kenya is suffering from the same, especially seeing that
we import the C level suite of most telcos to bring in "experienced people."

Perhaps, telcos need more of innovative people and less of experienced
people - there isn't that much to lose anyway, or is there?

On Wednesday, 26 March 2014, Ali Hussein <ali at hussein.me.ke> wrote:

> Listers
>
> Jaindi Kisero's article on the imminent departure (demise?) of two telcos
> in Kenya make compelling reading.
>
>
> http://www.nation.co.ke/oped/Opinion/mobile-phone-firm-pullout-market-failure/-/440808/2257472/-/2crh39/-/index.html
>
> The article basically explores the possibility that market failure is what
> we are experiencing in Kenya.
>
> According to Wikipedia Market Failure is a concept within economic theory
> describing when the allocation of goods and services by a free market<http://en.wikipedia.org/wiki/Free_market>
>  is not efficient <http://en.wikipedia.org/wiki/Economic_efficiency>.
> That is, there exists another conceivable outcome where a market
> participant may be made better-off without making someone else worse-off.
> (The outcome is not Pareto optimal<http://en.wikipedia.org/wiki/Pareto_efficiency>.)
> Market failures can be viewed as scenarios where individuals' pursuit of
> pure self-interest leads to results that are not efficient - that can be
> improved upon from the societal point-of-view.[1]<http://en.wikipedia.org/wiki/Market_failure#cite_note-1>
> [2] <http://en.wikipedia.org/wiki/Market_failure#cite_note-krugman-2> The
> first known use of the term by economists was in 1958,[3]<http://en.wikipedia.org/wiki/Market_failure#cite_note-Bator-3>
>  but the concept has been traced back to the Victorian philosopher Henry
> Sidgwick <http://en.wikipedia.org/wiki/Henry_Sidgwick>.[4]<http://en.wikipedia.org/wiki/Market_failure#cite_note-Medema-4>
>
> Market failures are often associated with time-inconsistent preferences<http://en.wikipedia.org/w/index.php?title=Time-inconsistent_preferences&action=edit&redlink=1>
> ,[5] <http://en.wikipedia.org/wiki/Market_failure#cite_note-5> information
> asymmetries <http://en.wikipedia.org/wiki/Information_asymmetry>,[6]<http://en.wikipedia.org/wiki/Market_failure#cite_note-6>
>  non-competitive markets <http://en.wikipedia.org/wiki/Market_structure>,principal-agent
> problems <http://en.wikipedia.org/wiki/Principal%E2%80%93agent_problem>,
> externalities <http://en.wikipedia.org/wiki/Externalities>,[7]<http://en.wikipedia.org/wiki/Market_failure#cite_note-Laffont-7>
>  or public goods <http://en.wikipedia.org/wiki/Public_goods>.[8]<http://en.wikipedia.org/wiki/Market_failure#cite_note-8> The
> existence of a market failure is often the reason for government
> intervention in a particular market <http://en.wikipedia.org/wiki/Market>.
> [9] <http://en.wikipedia.org/wiki/Market_failure#cite_note-9>[10]<http://en.wikipedia.org/wiki/Market_failure#cite_note-rees-10> Economists,
> especially microeconomists <http://en.wikipedia.org/wiki/Microeconomics>,
> are often concerned with the causes of market failure and possible means of
> correction.[11]<http://en.wikipedia.org/wiki/Market_failure#cite_note-mankiw-11> Such
> analysis plays an important role in many types of public policy<http://en.wikipedia.org/wiki/Public_policy_(law)> decisions
> and studies. However, some types of government policy interventions, such
> as taxes, subsidies, bailouts <http://en.wikipedia.org/wiki/Bailout>,
> wage and price controls, and regulations, including attempts to correct
> market failure, may also lead to an inefficient allocation of resources,
> sometimes called government failure<http://en.wikipedia.org/wiki/Government_failure>
> .[12]<http://en.wikipedia.org/wiki/Market_failure#cite_note-weimervining-12> Thus,
> there is sometimes a choice between imperfect outcomes, i.e. imperfect
> market outcomes with or without government interventions. But either way,
> if a market failure exists the outcome is not Pareto efficient<http://en.wikipedia.org/wiki/Pareto_efficiency>.
> Mainstream neoclassical and Keynesian economists believe that it may be
> possible for a government to improve the inefficient market outcome, while
> several heterodox <http://en.wikipedia.org/wiki/Heterodox_economics> schools
> of thought disagree with this.[13]<http://en.wikipedia.org/wiki/Market_failure#cite_note-n._gregory_mankiw-13>
>
>
> While Creative Destruction alludes to free-market economics as a
> description of processes such as downsizing in order to increase the
> efficiency and dynamism of a company or economy.
>
>
> The case of Orange and yu in my humble opinion is the stuff of Business
> School studies at Strathmore and others for years to come.
>
>
> The questions that the country now needs to ask include:-
>
>
> 1. How will the demise of two major multinationals in Kenya going to
> affect the country's FDI outlook? Kenya is quickly gaining a reputation as
> a graveyard for MNCs who come here without appreciating the GLOCAL
> Principle.
>
> 2. What are the market dynamics that are going to be unleashed by a a
> defacto duopoly that now exists?
>
> 3. What impact will it have going forward on the attractiveness of Kenya
> as a destination for tech giants and Startups alike?
>
> 4. Is the regulatory environment being optimally executed to protect both
> investors and consumers alike?
>
> 5. Lastly - the more things change the more they remain the same?
> Seriously. The way this is going I won't be surprised if Airtel also throws
> in the towel seeing as they haven't turned a profit since their entry into
> the country.
>
>
> *Ali Hussein*
>
> +254 0770 906375 / 0713 601113
>
> Twitter: @AliHKassim
>
> Skype: abu-jomo
>
> LinkedIn: http://ke.linkedin.com/in/alihkassim<http://ke.linkedin.com/in/alihkassim>
>
> Blog: www.alyhussein.com
>
> "I fear the day technology will surpass human interaction. The world will
> have a generation of idiots".  ~ Albert Einstein
>
> Sent from my iPad
>

-- 
with Regards:

blog.denniskioko.com <http://www.denniskioko.com/>
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