Telecom takeovers reduce competition and may result in sharply higher tariffs

MOBILE OPERATOR CONSOLIDATION GATHERS PACE BUT REDUCES COMPETITION

(Posted 07th March 2014)

When last year Airtel Uganda took over rival Warid Telecom, few observers would have expected this trend to continue and in fact spread across the region. The move catapulted Airtel into the second position in Uganda with an estimated 7.5 million subscribers, behind MTN which, going by their own figures, has a million more or 8.5 million subscribers.

In Kenya both Safaricom and Airtel have just concluded a deal to buy Essar’s Kenyan telecom unit YU, with Safaricom taking over the infrastructure and Airtel acquiring some 2.7 million customers to boost their own fortunes in the Kenyan market and cement their contention to be THE Pan African network.

Now news have emerged in Uganda, that France Telecom, which had entered East Africa in a haphazard fashion some years ago with a major investment in Kenya Telkom and a bottom up start in Uganda, is also seeking to offload some of their investment here, as the going for them clearly got too tough. Across the border has Orange Kenya’s CEO Mikhael Ghossein made an added mess of things when he claimed to have not a clue about what was going on, prompting some acid comments from the public at large and even his competitors about his state of mind, or his situational awareness, while in Uganda the company has all but acknowledged that the endgame is being played out now for them.

In Kenya both Airtel and Safaricom will be studying the development with keen interest if Orange’s Kenyan subsidiary too goes on the chopping block, though having the Kenya government as a partner in Orange, courtesy of their erstwhile majority divestiture of a 70 percent shareholding in Kenya Telkom to Orange, is not seen as an advantage. In addition has the company made significant losses and is facing a number of other problems an investor would not like to get dragged into.

In Uganda, again Airtel and very likely MTN are going to battle it out for the Orange business, though Uganda Telecom, owned by the Libyan governments’ foreign investment arm, may be a quiet contender as they seek to restore market confidence and add numbers to their subscriber list, presently occupying the third spot in terms of subscribers, and unlike their competitors which operate with 3.75G or even 4GLET platforms for data transmission, is still stuck with the simple 3G platform, though at the most affordable tariffs of them all.

For visitors from abroad but also for locals in Uganda and Kenya the latest developments will mean less competition and very likely once again higher tariffs, with in particular the cost of data bundles often described as wildly overpriced. Still are local tariffs for foreign tourists and business visitors, for data and for voice calls, cheaper than the roaming option as on return home they often have a rude shock when two months down the line the bills arrive, in some cases costing as much as the trip itself.

The mobile operators in turn lament that they have bought huge capacities from the fibre optic cable owners and are only re-selling a fraction of it to the market – very likely because of their hunger for instant profits and keeping the tariffs up instead of, what has been suggested, tripling ‘sales’ by lowering tariffs.

Foreign visitors also need to be reminded that upon the purchase of a local SIM card they must immediately register their ‘ownership’ by producing a valid photo ID, even if they only plan to use the cards for the duration of their stay.

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