<br><br><div class="gmail_quote">On Wed, Jan 19, 2011 at 3:57 PM, Shem Ochuodho <span dir="ltr"><<a href="mailto:shemochuodho@yahoo.com">shemochuodho@yahoo.com</a>></span> wrote:<br><blockquote class="gmail_quote" style="margin:0 0 0 .8ex;border-left:1px #ccc solid;padding-left:1ex;">
<div><div style="font-family:bookman old style,new york,times,serif;font-size:12pt">
<p class="MsoNormal" style="margin-bottom:0.0001pt;line-height:normal"><span style="font-size:12pt;font-family:"Times New Roman","serif"">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.</span></p>
<p class="MsoNormal" style="margin-bottom:0.0001pt;line-height:normal"><span style="font-size:12pt;font-family:"Times New Roman","serif""> </span></p>
<p class="MsoNormal" style="margin-bottom:0.0001pt;line-height:normal"><span style="font-size:12pt;font-family:"Times New Roman","serif"">My 3 main
concerns:-</span></p>
<p class="MsoNormal" style="margin-bottom:0.0001pt;line-height:normal"><span style="font-size:12pt;font-family:"Times New Roman","serif""> </span></p>
<p style="margin-bottom:0.0001pt;line-height:normal"><span style="font-size:12pt;font-family:"Times New Roman","serif""><span>1)<span style="font:7pt "Times New Roman""> </span></span></span><span style="font-size:12pt;font-family:"Times New Roman","serif"">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?</span></p>
<p style="margin-bottom:0.0001pt;line-height:normal"><span style="font-size:12pt;font-family:"Times New Roman","serif""><span>2)<span style="font:7pt "Times New Roman"">
</span></span></span><span style="font-size:12pt;font-family:"Times New Roman","serif"">CCK is
supposed to be independent. Why should the government (read Ministry) always
interfere in their decisions?</span></p>
<p style="margin-bottom:0.0001pt;line-height:normal"><span style="font-size:12pt;font-family:"Times New Roman","serif""><span>3)<span style="font:7pt "Times New Roman""> </span></span></span><span style="font-size:12pt;font-family:"Times New Roman","serif"">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.”?</span></p>
<p class="MsoNormal" style="margin-bottom:0.0001pt;line-height:normal"><span style="font-size:12pt;font-family:"Times New Roman","serif""> </span></p>
<p class="MsoNormal" style="margin-bottom:0.0001pt;line-height:normal"><span style="font-size:12pt;font-family:"Times New Roman","serif"">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?</span></p>
<p class="MsoNormal" style="margin-bottom:0.0001pt;line-height:normal"><span style="font-size:12pt;font-family:"Times New Roman","serif""> </span></p>
<p class="MsoNormal" style="margin-bottom:0.0001pt;line-height:normal"><span style="font-size:12pt;font-family:"Times New Roman","serif"">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?</span></p>
<p class="MsoNormal" style="margin-bottom:0.0001pt;line-height:normal"><span style="font-size:12pt;font-family:"Times New Roman","serif""> </span></p>
<p class="MsoNormal" style="margin-bottom:0.0001pt;line-height:normal"><span style="font-size:12pt;font-family:"Times New Roman","serif"">Best rgrds,</span></p>
<p class="MsoNormal" style="margin-bottom:0.0001pt;line-height:normal"><span style="font-size:12pt;font-family:"Times New Roman","serif"">Shem</span></p>
<div> </div></div></div></blockquote><div><br>Just to add on to the debate, here is an analysis I have found interesting that I could not resist sharing:<br><br>Article Source: <b><a href="http://goo.gl/NUjFl">http://goo.gl/NUjFl</a></b><br>
<br><h2 class="title">Price Wars: Rates Are Sustainable, The Government is Neither Fair nor Honest</h2>
<div class="postdate">Posted by <strong>Tech Mtaa</strong> on January 19th, 2011 </div>
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<div id="_mcePaste"><span style="font-size: small;">Once again the Government appears to be taking sides in the wars between Telecom companies.</span></div>
<div><span style="font-size: small;"><span style="font-size: small;"><br>
</span></span></div>
<div id="_mcePaste"><span style="font-size: small;"><span style="font-size: small;">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.</span></span></div>
<div><span style="font-size: small;"><span style="font-size: small;"><br>
</span></span></div>
<div id="_mcePaste"><span style="font-size: small;"><span style="font-size: small;">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.</span></span></div>
<div><span style="font-size: small;"><span style="font-size: small;"><span id="more-1362"></span><br>
</span></span></div>
<div id="_mcePaste"><span style="font-size: small;"><span style="font-size: small;">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.</span></span></div>
<div><span style="font-size: small;"><span style="font-size: small;"><br>
</span></span></div>
<div id="_mcePaste"><span style="font-size: small;"><span style="font-size: small;"><span class="blippr-nobr">Times<span class="blippr-nobr"><a href="http://www.blippr.com/music/songs/470044-Times" target="_blank" rel="http://www.blippr.com/music/songs/470044-Times.whtml" class="blippr-inline-smiley blippr-inline-smiley-09"><img class="wp-smiley" src="http://cdn.blippr.com/images/inline-face_09.png?1265851550" alt="Times reviews" height="14" width="14"></a></span></span>
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 <span class="blippr-nobr">Orange<span class="blippr-nobr"><a href="http://www.blippr.com/music/songs/542470-Orange" target="_blank" rel="http://www.blippr.com/music/songs/542470-Orange.whtml" class="blippr-inline-smiley blippr-inline-smiley-09"><img class="wp-smiley" src="http://cdn.blippr.com/images/inline-face_09.png?1265851550" alt="Orange reviews" height="14" width="14"></a></span></span>.
In the present circumstances they must review their business models to
survive and typically these organizations are resisting change.</span></span></div>
<div><span style="font-size: small;"><span style="font-size: small;"><br>
</span></span></div>
<div id="_mcePaste"><span style="font-size: small;"><span style="font-size: small;">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.</span></span></div>
<div id="_mcePaste"><span style="font-size: small;"><span style="font-size: small;">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 <span class="blippr-nobr">India<span class="blippr-nobr"><a href="http://www.blippr.com/music/songs/497408-India" target="_blank" rel="http://www.blippr.com/music/songs/497408-India.whtml" class="blippr-inline-smiley blippr-inline-smiley-09"><img class="wp-smiley" src="http://cdn.blippr.com/images/inline-face_09.png?1265851550" alt="India reviews" height="14" width="14"></a></span></span>. How has the low pricing structure in India impacted the economy of India? Most certainly, the impact has not been negative.</span></span></div>
<div><span style="font-size: small;"><span style="font-size: small;"><br>
</span></span></div>
<div id="_mcePaste"><span style="font-size: small;"><span style="font-size: small;">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?</span></span></div>
<div id="_mcePaste"><span style="font-size: small;"><span style="font-size: small;">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.</span></span></div>
<div><span style="font-size: small;"><span style="font-size: small;"><br>
</span></span></div>
<div id="_mcePaste"><span style="font-size: small;"><span style="font-size: small;">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.</span></span></div>
<div><span style="font-size: small;"><span style="font-size: small;"><br>
</span></span></div>
<div id="_mcePaste"><span style="font-size: small;"><span style="font-size: small;">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 <span class="blippr-nobr">Information<span class="blippr-nobr"><a href="http://www.blippr.com/music/songs/476433-Information" target="_blank" rel="http://www.blippr.com/music/songs/476433-Information.whtml" class="blippr-inline-smiley blippr-inline-smiley-09"><img class="wp-smiley" src="http://cdn.blippr.com/images/inline-face_09.png?1265851550" alt="Information reviews" height="14" width="14"></a></span></span> and <span class="blippr-nobr">Communication<span class="blippr-nobr"><a href="http://www.blippr.com/music/songs/376616-Communication" target="_blank" rel="http://www.blippr.com/music/songs/376616-Communication.whtml" class="blippr-inline-smiley blippr-inline-smiley-09"><img class="wp-smiley" src="http://cdn.blippr.com/images/inline-face_09.png?1265851550" alt="Communication reviews" height="14" width="14"></a></span></span> in the <span class="blippr-nobr">Nation<span class="blippr-nobr"><a href="http://www.blippr.com/books/98097-Nation" target="_blank" rel="http://www.blippr.com/books/98097-Nation.whtml" class="blippr-inline-smiley blippr-inline-smiley-05"><img class="wp-smiley" src="http://cdn.blippr.com/images/inline-face_05.png?1265851550" alt="Nation reviews" height="14" width="14"></a></span></span> are true.</span></span></div>
<div id="_mcePaste"><span style="font-size: small;"><span style="font-size: small;">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.</span></span></div>
<div><span style="font-size: small;"><span style="font-size: small;"><br>
</span></span></div>
<div id="_mcePaste"><span style="font-size: small;"><span style="font-size: small;">Monopolies are a bad thing whether they are owned by Government or by private investors. <span class="blippr-nobr">Competition<span class="blippr-nobr"><a href="http://www.blippr.com/music/songs/407587-Competition" target="_blank" rel="http://www.blippr.com/music/songs/407587-Competition.whtml" class="blippr-inline-smiley blippr-inline-smiley-09"><img class="wp-smiley" src="http://cdn.blippr.com/images/inline-face_09.png?1265851550" alt="Competition reviews" height="14" width="14"></a></span></span> laws should be applied impartially and the aim should be to maximize consumer welfare and benefit.</span></span></div>
<div id="_mcePaste"><span style="font-size: small;"><span style="font-size: small;">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 <span class="blippr-nobr">Kenya<span class="blippr-nobr"><a href="http://www.blippr.com/music/albums/476431-Kenya" target="_blank" rel="http://www.blippr.com/music/albums/476431-Kenya.whtml" class="blippr-inline-smiley blippr-inline-smiley-09"><img class="wp-smiley" src="http://cdn.blippr.com/images/inline-face_09.png?1265851550" alt="Kenya reviews" height="14" width="14"></a></span></span> headed?</span></span></div>
<p><span style="font-size: small;"><span style="font-size: small;">nce again the Government appears to be taking sides in the wars between Telecom companies.<br>
>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. </span></span></p>
<p><span style="font-size: small;"><span style="font-size: small;"><br>
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.</span></span></p>
<p><span style="font-size: small;"><span style="font-size: small;"><br>
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.</span></span></p>
<p><span style="font-size: small;"><span style="font-size: small;"><br>
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.</span></span></p>
<p><span style="font-size: small;"><span style="font-size: small;"><br>
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.<br>
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.</span></span></p>
<p><span style="font-size: small;"><span style="font-size: small;"><br>
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?<br>
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.</span></span></p>
<p><span style="font-size: small;"><span style="font-size: small;"><br>
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.</span></span></p>
<p><span style="font-size: small;"><span style="font-size: small;"><br>
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.<br>
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.</span></span></p>
<p><span style="font-size: small;"><span style="font-size: small;"><br>
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.<br>
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?</span></span></p></div></div><br clear="all"><br>-- <br>Best regards,<br>Odhiambo WASHINGTON,<br>Nairobi,KE<br>+254733744121/+254722743223<br>_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ <br>Damn!!<br>
<br>