In April 2018, T-Mobile and Sprint announced their intention to merge, to better compete with AT&T and Verizon. The aim of the union was to spur lower prices for consumers and enable the new entity fast deploy next generation 5G networks across the US.
As this was unfolding, Kenya’s telco stage would be privy to news of an intended merger between Airtel and Telkom, the second and third player in the market. Unlike the US where the merger was approved given the portended imbalance in that market, the Kenyan case attracted ridicule and criticism from varied quarters.
The Ministry of Information Communications and Technology (ICT), has the responsibility to substantively drive the government’s Digital business agenda and assure Kenyans of progressive improvement; with a focus on innovation, availability and accessibility.
The role of a regulator never stops; it is the continued review of checks and balances that keep the level of competition and scales in check, ensuring the market is attractive for further investment by current and prospective entrants. It should not always be seen as “agitation from market players” for regulatory relief.
It is also baffling that Kenya, the progressive and economic giant in the region, lacks swift regulatory intervention which is to blame for the exit of five investors from its telco sector, while our smaller neighbour Uganda comfortably houses five.
Allow me to wade into this vault of contention. See, traditionally, the telco sector was viewed as a natural monopoly that required no regulation to function effectively. With liberalisation, competition grew and technology changes saw the introduction of a competition-led approach.
The role of the newly launched industry regulator at the time – the Communications Commission of Kenya (CCK now the Communications Authority) was to gradually evolve, guided by better principles of competition law, economics and corporate strategy, given that the private sector was pumping in investments to develop the telco sector and match global standards.
When Kenya’s story is told, we bear the tag of hub of technological advancement and adoption, thanks to M-Pesa and other short stories of innovation that made it for adoption by Silicon Valley.
Granted, there is exponential growth year on year, on mobile phone accessibility, subscriptions and therefore communication. But, does this growth epitomise customer value, integrity or even qualify as a credible case study of a truly thriving industry?
It may be argued that mergers may reduce competition in any market, whether through higher prices, less favourable terms of service, or slower investment thus affecting technological advancement.
Regardless, going from four players, to three and now two only serves as a wake-up call for vital reform on the need for healthy competition, for the benefit of the consumer.
It is sad to note that the CA, which has been regarded as a model regulator in sub-Saharan Africa, is slow to take the bold step of correcting very obvious market anomalies unlike her counterparts in the region. This regulatory inertia not only discourages investment in the sector but will affect the consumer in the long-term.
Having said that though, is it not better to end up with a duopoly, should the intended merger proceed than to not allow the merger, witness the death of the two smaller players and end up in a monopoly?
And – should the merger proceed, the CA will still need to ensure that it does bring about regulatory relief, through the implementation of measures that will enable the telco industry to thrive.
The literature on mergers and acquisitions to our legislators, the industry regulator and its mother ministry, is seemingly lost on them, given that their role remains to preserve and improve on efficiencies and formulate remedies that allow Wanjiku to achieve more.
All Wanjiku needs is to have easier access to services, feel the impact of the innovation led by the telco industry – supported by e-platforms, more competitive pricing on products and services; essentially more choice to address their dynamic needs and expectations.
Petra Abondo via email.