Kenya grants new gateway licences while Sierra Leone threatens cuts

The Kenyan Government has announced its decision to grant international gateway licences to the country's two leading mobile operators.

The operators in question are Celtel and Safaricom. International calls for mobile users are already 50% cheaper for Kenya's six million mobile subscribers who previously had to connect through state-owned Telkom Kenya's gateway, paying a large premium.

GSMA Welcomes Move

The move has been warmly welcomed by the GSM Association (GSMA), the global trade association for mobile operators. GSMA's Chief Government and Regulatory Affairs Officer, Tom Phillips said: "This is a great development for Kenyan consumers who are already seeing improved services and greatly reduced prices for overseas calls. Liberalising international gateways removes a bottleneck that has been choking African businesses as they seek to compete in a global market. It also allows operators to interconnect at a regional level, leveraging existing infrastructure to provide better quality and more affordable services to consumers."

Such favourable comment could not, however, be levelled by the GSMA at Sierra Leone, which is threatening via draft legislation to return exclusive gateway rights to the country's incumbent fixed operator, SierraTel. This would raise costs and compromise service levels. Tom Phillips is forceful: "It is disappointing that the Sierra Leone Government is considering such legislation. Not only does it threaten the service currently enjoyed by 350,000 mobile subscribers but also it goes against the pro-competition principals endorsed by WATRA and ECOWAS. Sierra Leone would join Gambia as the only country in the region that maintains monopoly control of gateways and as such it risks missing out on the substantial economic and social benefits - and increased tax receipts - that competition brings." 

One enterprise has interests in both countries. Celtel International, a major pan-African operator, has businesses in both Kenya and Sierra Leone. Celtel International CEO Marten Pieters can point to the great consumer benefits of international gateway liberalisation: "When Celtel received regulatory approval to connect its networks across the Congo Republic and DR Congo border, traffic between Kinshasa and Brazzaville increased 20 fold as we passed on cost savings to our customers."

High Demand Elasticity

Elasticity of demand for communication services is extremely high in Africa. A study by PriceWaterhouse Coopers has highlighted the critical impact that government regulation has on mobile operators' business plans and their ability to meet the demand for mobile services.

 Martin Pieters again: "Across Africa policy-makers recognise that liberalisation has brought growth and investment not only to the telecoms sector but also to the wider economy, creating jobs and boosting GDP...We know that foreign direct investment levels correlate strongly with the quality of the telecoms infrastructure and therefore call on the Sierra Leone Government to reject the proposed amendment that threatens all stakeholders."


 On a more specific level the GSMA points to several drawbacks of the proposed legislation

  • creating a monopoly will destroy competition, increase prices and reduce efficiency. The demand for low cost, high quality services will not be met; both consumers and business will suffer from higher costs. Fewer calls will be made and lower traffic volumes will reduce Government tax receipts from international calls;
  • creating a monopoly bottleneck will lead to traffic congestion and result in poor service quality on international calls; and
  • an advanced liberalised telecoms sector, such as that enjoyed by Sierra Leone, is a requisite for foreign direct investment. Returning the international gateway to monopoly control would send the wrong signal to international investors.

This is a story which we believe could run on for some time...

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