Kenya’s telecommunications sector has for the longest time been driven by innovations that have spurred robust business growth, creating employment and other related opportunities, directly and indirectly.
The 2018 GSMA report, The Mobile Economy Sub-Saharan Africa, indicates that in 2017, mobile technologies and services generated about 7.1percent of GDP in sub-Saharan Africa, a contribution that amounted to about $110 billion of added economic value. These figures are projected to rise to about 7.9 percent and $150 billion, respectively by 2022.
The mobile eco-system also supported about three million jobs, directly and indirectly and made a substantial contribution to the funding of the public sector, with almost $14 billion raised through taxation; these are projected to rise northwards of 3.5 million jobs and $16 billion respectively by 2022.
Despite the growth seen over the years, Kenya’s sector is still ailing; one player controls about 70 per cent of the country’s mobile subscribers and more than 90 per cent of the revenue collected in the market. This phenomenon has stunted the growth of smaller players hence affecting the whole telecommunications eco-system.
Early this year, Airtel and Telkom announced their intention to merge their respective businesses to operate under a joint venture company that they have christened Airtel-Telkom. The intention was laudable as it spoke to renewed hope in a precarious telecommunications arena. However, this may soon be short-lived.
The recent move by the Communications Authority of Kenya (CAK) to delay the approval process of the joint venture between Airtel and Telkom, pending investigations by the Ethics and Anti-Corruption Commission (EACC), may potentially deny Kenyans the chance of experiencing the value proposition of the joint force. EACC’s investigations are in connection with allegations of misappropriation of public funds in the process the privatisation, recapitalisation and restructuring of the balance sheet of Telkom Kenya Limited.
This exercise spans back to 2012, with the Commission seeking to establish the circumstances under which the Treasury ceded further ownership of Telkom Kenya to France Telecom, which later sold its stake as majority shareholder to private equity fund Helios Investment Partners. In my view, this recapitalisation and the intended merger are two separate dichotomies and processes that are not connected.
As an economy that is powered primarily by mobile communication, the reversion into a monopoly, which seems to be where this country is headed if the merger is not approved, will see a fall in consumer welfare through: an increase in product and solution cost, a shrinkage in choice options, a reduced rate of market development and diminished economic productivity. This makes it unsustainable for business and investors, more so in a sector that is in urgent need of regulatory relief.
Given the low or zero potential of growth for small players in the sector as it currently is, the Kenyan market has seen investors close shop due to the unfavourable growth environment. Essar Telecom, operating under the YU brand wound up its operations in the country because of the current state of the market. Across our borders, South Africa, Rwanda, Botswana, Namibia and other African economies are now attracting more foreign investment owing to their proactive regulatory environments.
Through this, they are ranking far better than Kenya in overall regional and even global competitiveness. What must be made clear though, is that the provision of an enabling environment for smaller players to thrive should not be misconstrued to mean that they will be the benefactors of a “free ride”. These smaller players will finally be able to realise growth against the investments they make to the benefit of both the consumer and the taxman.
I believe Kenyans have not forgotten the days of a monopoly in the audio-visual broadcast sector, where the country had to be content with the solitary State broadcaster – the then Voice of Kenya now the Kenya Broadcasting Corporation. Content choices were to improve, upon the liberalisation of the airwaves, the digitisation of platforms and the implementation of best practice, making it conducive for more players to join that sector.
A monopoly that controls an industry’s trends and ecosystem, choking its consumers, remains dangerous for the overall growth of any industry if it is not checked and made to evolve with the inevitable dynamics of growth and consumer demands.
David KeitanyTelecommunications specialist.