Tuesday, May 11, 2010

New Communications Commission of Kenya Rules Heat Up Mobile Phone Wars in Kenya

Source: Daily Nation

Dominant player, Safaricom, is up in arms against new rules published by the Communications Commission of Kenya that it says are meant to help its smaller rivals, Zain, Orange and Yu.

The market regulator on Tuesday came out to deny that it was siding with the smaller players.

It pledged to implement the regulations that have been welcomed by the other three companies, but bitterly denounced by Safaricom.

The new rules will allow the CCK to control or even lower call charges set by the market leader.

Price increases or reductions can only be implemented with approval of the regulator; while even popular marketing strategies such as reduced promotional rates such as Supa Ongea and Bonga Points can only be introduced with permission and can run only for limited periods.

Safaricom is complaining that it is being specifically targeted because it is the only mobile phone provider that meets the dominance threshold defined in the regulations; and therefore, the only one open to the new controls.

CEO Michael Joseph told the Nation on Tuesday that Safaricom might go to court to block the new regulations.

"Those who have a problem with the regulations should go to the tribunal," CCK director-general Charles Njoroge, told a press conference on Tuesday.

The battle came out into the open on Monday when Safaricom put out full-page press advertisements decrying the five new rules under the Kenya Information and Communications Regulations 2010.

Mr Joseph accused CCK of punishing success and using punitive regulations to support less innovative rival companies.

Zain, Orange and Yu countered the following day with a joint advertisement of their own in praising CCK and the government for acting against "abuse of dominance" and ensuring that "consumers are not exploited".

The new regulations gazetted by CCK are on Dispute Resolution; Tariffs and Compliance Monitoring, Inspection and Enforcement.

Others are on Interconnection and Provision of Fixed Links, Access and Facilities; and Fair Competition and Equality of Treatment.

It is the latter that has most galled Safaricom.

"The regulator has a misconceived view on competition management and has given far too much audience to the unfounded allegations being made by sections of the industry," said Mr Joseph on Tuesday evening.

In an earlier interview, Telkom Kenya (Orange) chief executive Mickael Ghossein, termed Safaricom's market dominance a "dangerous situation, and if the regulator doesn't intervene, it will get worse".

He said that a situation where one operator controls 80 per cent of the market makes it very difficult for other players to stay afloat.

But Mr Joseph counters that the market share in Kenya is a direct reflection of the level of investment and strategies of each operator.

"It is curious to note that both Zain and Safaricom started their operations at the same time, paid the same amount to enter the market, and were allocated the same resources and indeed, Zain (then Kencell) was the market leader for the first one year of its operations. The new market entrants also came in fully aware of the dynamics of this competitive market," he insisted.

A service provider will be considered dominant in a particular segment of the market if their gross revenues exceed 25 per cent of the total revenues of all licensees.

Safaricom is the dominant player controlling 78 per cent of the market, while Zain has 14 per cent, Orange 4 per cent and Yu trailing with 1 per cent.

Mr Joseph says the regulations seek to punish the dominant player without proof of any anti-competitive practices.

However, in their joint statement, Zain, Orange and Yu disputes Safaricom's assertion. They said the regulations do not attempt to introduce price controls, but only intervene where there is a monopolistic situation.

According to Mr Alex Gakuru, chairman of the Kenya ICT Consumers Association, Kenyans have suffered for many years from costly phone tariffs.

"The regulator's move was way overdue. CCK has a legal obligation to protect consumers."