"CEOs can't wait to read Sunny Bindra's articles every week."

End this telecoms charade

Jan 14, 2007 Strategy, Sunday Nation

One of the more depressing news items to appear at the close of 2006 concerned the problems that have emerged in the consortium (headed by VTEL of Dubai) that won the Second National Operator (SNO) telecommunications licence earlier in the year. This was the operator we all hoped would go head-to-head with Telkom Kenya. It seems, however, that the local partners in the consortium may be having some difficulty with the small matter of coughing up the promised cash.

Not again. We’ve been here before. We still don’t have a third mobile operator in this country, years after awarding the license to a consortium led by South Africa’s Econet Wireless. Why? Because consortium partners got into financial disputes about who owed what to whom, and ended up in court. Where they’ve been since. In fact, the Econet group is now trying to block the licensing of the SNO until its own matter is sorted out.

This is plain ridiculous, and you and I are the losers. Why on earth we allow jokers to join bidding consortia, and why we remain unable to conduct a proper tendering process that actually leads to services appearing on the ground, is beyond me.

Let us be clear: this is too important an issue to joke around with. Telecommunications liberalisation is known to be a very important driver of overall economic growth. Many a study has shown a strong correlation between positive developments in telecommunications and growth in GDP per capita. Better and more diverse telecommunications infrastructure improves everyone’s productivity.

You don’t have to be an economist to understand that. Economic growth in a modern economy comes from efficient exchanges – of goods, services and information. If more people are connected, talk more, trade more and know more, more jikos will be blazing and more pots will be filled. That should be self evident.

Not, however, to our mandarins, who continue to preside over this farce. If service roll-outs continue to be delayed in this idiotic manner, all of Kenya will be the loser. We don’t actually care who wins the bids, how they are organised, who owns what and how they won. All we really care about is getting more and better services.

We want more call boxes. We want more rural telephony. We want better long-haul connectivity. We want cheaper local and international calls. We want better data backbones. We want better service and cheaper prices. And we want it now. While we cool our heels amidst courtroom dramas, the rest of the world is racing away from us.

India gains 6.6 million new mobile subscribers every month, according to The Economist. A recent piece pointed out that labourers, farmers and fishermen are suddenly part of the economic mainstream rather than being out on the periphery.

There are lessons here for us. At the start of this decade, India had one of the world’s lowest phone penetration rates. The huge boom of recent years has been occasioned largely by government getting out of the way: allowing free entry to foreign firms; cutting license fees; and encouraging competition. The result: India boasts the world’s cheapest call rates and handset prices. Yet the main firms providing the services enjoy great profit margins.

We stand in our own way. We insist on 30 per cent local ownership for firms with telecommunications licenses. Why? So that a motley crew of local cowboys and co-operative societies can partake in the festivities? What is the point of insisting on how the cake will be divided before we even bake it? Far better to let a competent firm get going, and insist that it sells a proportion of its shares to the Kenyan public after an agreed period. By forcing foreign service-providers to go to the altar with an ugly and rapacious local bride, we are merely sowing the seeds of an ugly divorce. In any case Kenyans as a whole would benefit far more from using the service provided to improve their lives, than from owning a flawed enterprise.

We also set out, years ago, to protect our own Telkom Kenya from competition. That was one of the biggest acts of folly we have committed. Years of poor service at absurd prices have been the cost we have paid for that one mistake. Had Telkom been thrown into the deep end to compete with lean and mean competitors, it might have emerged as a serious contender itself. As things stand, all the signs are that Kenyans will abandon it in droves as soon as a credible alternative appears.

My Telkom line was recently out of order for several weeks. After much complaining, I got to ask someone in customer service why repair had taken so long. Her answer said it all: December, you see, is a “holiday month”.

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