Phone giants call up political favours as price war rages

The explosive price wars in Kenya that have seen consumer prices of mobile phone talk-time tumbling by more than 40 per cent are grabbing the headlines.
But the real issues causing uncertainty in the fastest growing sector in the economy are politics and unpredictable regulation.

Political lobbying has been intense as the big players engage in a vicious battle to influence the competition policy and tariff regulations.

Away from the limelight, there has been pushing and shoving within the board of the Communications Commission of Kenya over whether it should agree to lease prime land situated next to its headquarters to Bharti Airtel — the new Indian owners of Zain Kenya.

Sources said the CCK board had faced immense pressure from the Ministry of Information and Communications to lease the property to Zain on the grounds that the government had made a commitment to provide land to the Indian investors on which they plan to construct their Africa headquarters.

Apparently, President Mwai Kibaki had during a visit to State House by top Bharti Airtel executives responded to a request by the Indian investors by directing the ministry to help Bharti acquire a suitable piece of land.

But in a remarkable display of independence, the CCK board reportedly rejected the proposal on the grounds that allowing one player to erect its headquarters on its own land, and on a location next to its headquarters, would send the wrong signals to Zain’s competitors.

According to our sources, an alternative piece of land belonging to a government parastatal is now being considered and may be leased to the Indian investors.

Although provision of free land to investors is not uncommon in incentive packages, the issue, coming against the backdrop of intense jostling in the industry, is bound to provoke murmurs and claims of preferential treatment.

Perhaps what captures the state of regulatory flux currently prevailing in the mobile phone industry even more clearly is the recent deal between the government and its joint partner in Telkom Kenya, Orange Telecom of France.

In a classic example of a situation where deals are signed with foreign investors without regard to even-handedness to all players, the government in April this year doled out liberal concessions to the French investors that were bound to drastically tilt the competitive playing field in favour of Telkom Kenya.

The upshot is that the CCK has been left in an awkward situation — on the one hand trying to assert its independence as an autonomous regulator, and on the other facing pressure to implement decisions and commitments the government made to the French investors under totally different circumstances.

Under the confidential shareholders deal, a copy of which has been seen by The EastAfrican, the government has, for instance, promised to give Telkom Kenya exclusive government contracts.

Specifically, the agreement stipulates that the government will endeavour to ensure that various government ministries and departments grant rights to Telkom Kenya for the government’s private telephony networks and IP-based telecommunications services.

The government has also committed to exclusively grant Telkom contracts for data and mobile services.

France Telecom was also promised a contract to manage the government interest in the fibre optic cable company, Teams, the government-owned national fibre optic backbone NofBi, and a contract to operate and maintain the GCCN (Government Common Core Network) for two years.