Connecting Africa is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 3099067.

Investment

Price Controls Would Harm Kenya Telecom Market, Says Think Tank

Article Image
Kenya's Institute of Economic Affairs (IEA) has lashed out at a regulatory proposal to impose pricing controls on the telecom sector, arguing that it would be a major setback for the industry.

In a presentation that will cheer market leader Safaricom, which has continued to oppose calls for pricing regulation, the policy think tank said that new rules would be counterproductive.

"Price controls are ineffective and inconsistent with 20 years of industry liberalization and most national economic policy," said the IEA in slides published on its website today. "The reintroduction of price controls would be a major policy reversal."

Authorities have previously come under pressure from Airtel and Telkom, the country's second- and third-biggest operators, to get tough on Safaricom. They have accused Safaricom Ltd. of taking advantage of its market power, setting prices so low that other companies cannot profitably compete.

Predictably enough, Safaricom has hit back and said that regulation would inevitably lead to an increase in calling rates, with nasty consequences for consumers.

The IEA appears to agree. "Some proposals prescribed in the retail sections would raise costs to consumers," it says in its presentation. It has also argued that notions of Safaricom's "dominance" tend to overlook the "differences in investments made by firms."

Nevertheless, data shows that Safaricom holds a mobile subscription market share of more than 70% and that its dominance has grown in the last five years. (See Kenyan Authorities Drop Plans to Break Up Safaricom Report.)

Earlier this year, authorities stopped short of recommending that Safaricom be carved up into separate voice and mobile money companies as a means of curbing its dominance. (See Safaricom Safe From the Splits, but Rural Network Sharing Likely.)

But they continue to assess other ways of boosting competition amid rising concern about Safaricom's market power and the wider affordability crisis in the African data market.

Operators including Safaricom have taken flak for the high prices they charge customers to use mobile data services. During November's AfricaCom event in Cape Town, South Africa, critics slammed African telcos for being either too greedy or too cowardly to experiment with new data pricing models.

A 2016 report from Ovum awarded Africa just 137 out of a possible 500 points in its mobile broadband development index, making it the worst performing region in the world.

Speaking at AfricaCom, Kamal Bhattacharya, Safaricom's chief innovation officer, admitted that pricing needed to be rethought "radically" and said operators should work on coming up with "meaningful pricing structures that will lead to sufficient profits but at the same time put purpose before profit."

The Safaricom executive also criticized telcos for being too slow at adopting new network technologies that might help to reduce costs for consumers. "We could be somewhere [else] if we were more aggressive in adopting new models," he said.

Iain Morris, News Editor, Light Reading

Innovation hub

Story

Four agritech startups to watch in 2024

Connecting Africa has compiled a list of four agritech startups that are making a difference in the communities they serve.

Story

Paymentology looks to strengthen its African roots

Global issuer-processor Paymentology's CEO Jeff Parker spoke to Connecting Africa about the company's African roots and aspirations to work with more banks, fintechs and enterprises both on the continent and globally.

More Innovation hub

Latest video

More videos

Partner perspectives

All Partner Perspectives

Sponsored video

More videos

Industry announcements

More Industry announcements

Upcoming events

Africa Tech Festival 2024
November 11-14, 2024
Cape Town, South Africa
More Upcoming events

Africa Tech Perspectives

Story

Uber's Marjorie Saint-Lot on inclusion and sustainability in Africa

Uber's Country Manager for Ghana and Cote d'Ivoire, Marjorie Saint-Lot, shares how the ride-hailing company is approaching public-private partnerships, environmentally friendly initiatives and gender inclusion in Africa.

Story

The 100 most influential African leaders in 2023

A new report from Africa Tech Festival and Connecting Africa puts a spotlight on the top 100 African leaders in the telecoms and technology sector in 2023.

Story

Deep dive into East Africa's tech startup ecosystem

New survey reveals a lack of access to investors, reliance on international VCs and global recession trends as the biggest barriers for East African tech startups to access funds.

More Africa Tech perspectives

Guest Perspectives

Story

Omdia View: February 2024

By Omdia Analysts

Highlights in February 2024 in the Middle East and Africa included 5G launches in Senegal and 5G trials in Egypt as well as Kenya's first 5G MVNO. Airtel also launched a new wholesale connectivity business while MTN and Huawei are planning a joint Innovation Technology Lab in South Africa – that and more in this month's Omdia View.

Story

Omdia View: January 2024

By Omdia Analysts

Highlights in January 2024 in the Middle East and Africa included a $200 million fintech deal between MTN and Mastercard as well as 5G network trials by Telecom Egypt – that and more in this month's Omdia View.

More Guest Perspectives

Like us on Facebook

Newsletter Sign Up


Sign Up
Tag id test-002