Cases of Africa’s telecom industry feuds rising
According to last credible statistics of mobile usage in Africa, more than 600 million mobile users exist in the content with two fifths having a smartphone.Despite the impressive growth over the last decade, the telecommunications industry in Africa is going through a period of change, led by several factors. Advances in cloud storage and cloud security, fast-moving smartphone technology and alleged monopolies within the sector are forcing the industry leaders to re-evaluate current business strategies.For example, Kenya’s largest telecommunications and media company, Safaricom, has a presence in just about every telecomm sub-sector, although that seems like it is soon about to change. News broke at the beginning of February that the company is likely to face structural separation in the face of the renewed efforts for the split of its mobile money business with that of telephony business.With Safaricom effectively no longer just an infrastructure company, the next move is to figure out their involvement with the continued work on the broadcast network. Safaricom, a managed hosting and telecommunications company with offices all over Kenya, also has a lot of changes on the way. The company has over the years demonstrated their commitment to their customers by winning several awards in the sector.On the other side, Airtel Kenya, a cry baby of Kenya telecom market, is singing a different tune and the company announced that it would be downgrading their full year earnings. Several factors contribute to this drop in earnings, including increasingly fierce competition from several other companies, like Safaricom. Another company, Orange Kenya has also delayed several of their large contracts, pushing the expected revenues from these projects from the end of the financial year 2016 into the third quarter of next year according to sources within the company working on its restructuring after the sale of stake by French telecom giant, Orange to a UK investment firm.
Kenya Telecom’s mobiles business has also experienced faster than anticipated customer migration away from its higher margin offerings to its lower margin platforms.In South Africa, Vodacom has dedicated managed hosting to customers who are progressively moving from its higher cost dedicated managed server infrastructure offering to its lower cost virtual private cloud offering. The speed of this migration has been greater than anticipated over the past twelve months putting downward pressure on hosting earnings for the half. An insider in the company to your blogger that she sees an end to the downgrades however, calling for a balancing out of their earnings in the first half of their 2017 financial year. The cloud-based storage they are currently implementing is less expensive to fund than other storage options, and should offset this year’s slightly lower earnings. In other African countries, several operators are offering customers unlimited data in the first few weeks or months in a move aimed at allowing the customer to understand their data-usage patterns before wholly committing to their contracts and offers include talk allowance, and a change to automated data add-ons. Such plans offers ranges from 500MB, 1GB, 3GB, 4GB and 6GB of data.Airtel Kenya has taken action – in the form of statements and formal complaints – against Safaricom’s alleged monopoly of the telecom industry in Kenya.Airtel Kenya has issued a formal complaint to the Competition Authority of Kenya for bullying other companies and their customers, and an alleged misuse of market power regarding its wholesale partners.
Airtel Kenya claims they resorted to the complaint because months of negotiations went unresolved.The formal complaint details Safaricom’s alleged practice of locking customers into sub-standard services and limiting their choice of mobile providers. Safaricom was supposedly doing this by refusing to provide 4G services to wholesale providers, which led to their wholesale partners offering customers restrictive data caps that were uncompetitive with their own retail offerings.Airtel Kenya has also voiced their concerns to the completion policy review. The company believes that Safaricom has a dominance on the telecommunications sector that is detrimental to the public.One of the foreign experts in advising Airtel Kenya told your blogger that “There is virtually no effective mobile competition exists in Kenya,” said the skirtie. “This is of significant benefit to Safaricom, positively reinforcing Safaricom’s enduring, pervasive, and unprecedented market dominance.” “It is our view that policy makers and regulators in Kenya have tolerated a telecommunications market where the incumbent has been protected from effective competition. A high-powered competition policy review and development entity should be created to independently advise the various government agencies and to formally review all regulation against competition principles.” With Safaricom currently under heat from much of the sector, it will be interesting to see how the Communication Authority of Kenya, the industry regulator responds. Should their operations be declared a monopoly, what effect with that have on their involvement with the ongoing 4G rollout and the national broadband projects? I guess only time will tell.