World Dialogue on Regulation

While Africa's mobile telephony markets have enjoyed considerable investment and profits, it is not clear that there is real competition. The high levels of concentration in the markets resulting from the staged introduction of additional operators is generally justified on the grounds of avoiding turmoil in the markets, managing spectrum allocation, and reducing required investment in base stations. This research surveys the key multi-national players on the African continent and argues that regulatory attention now warrants a shift towards a more pro-competitive market environment.

The full paper can be downloaded from the column on the righthand side of this page.

Introduction

The early months of 2006 saw spectacular evidence of the vibrancy of the market for mobile telephony in Africa. The Democratic Republic of Congo (DRC), Morocco and Nigeria were in discussions with operators about the licensing of third generation mobile telecommunications. Mauritania launched the assignment of a third mobile licence, while Egypt received eleven applications for its third mobile licence. MTN purchased Investcom for USD 5,500 millions. If there had been any doubt it was now clear that mobile telephony had truly taken off in Africa.

The success of cellular voice telephony, primarily the Global Standard for Mobile (GSM), has been made possible by the opening of markets to new operators, relegating to history the monopoly provision of fixed networks. In comparison with the sluggish growth and high monthly rentals of fixed telecommunications, mobile operators have attracted large numbers of customers with packages of handsets, calls and text messages that are considered to be affordable by a significant part of the population. To do so they have built substantial networks making significant investments. Competition has been sufficient to push operators to expand even if not always to reduce their prices.

Across the continent there are now many National Regulatory Authorities (NRAs) that can provide quasi-independent support for markets, though there are still comparatively few National Competition Authorities (NCAs). The effectiveness of the NRAs in implementing pro-competitive policies and in delivering benefits to current and potential customers is unclear and requires detailed analysis. They often have limited independence and some governments continue to shelter incumbent operators from competition, in particular by continuing their monopoly over international traffic.  A test case has been Somalia, where there is strong market growth, low prices, interconnection and competition–all in the absence of a regulator or even an effective government.

There are a significant number of market failings and abuses to occupy NRAs, though some of the work can be reduced through sharing within regional and global networks of regulators. There is a need for considerable support to improve the skills amongst the staff of NRAs and also in consumer protection, in both governmental agencies and associations. These are essential for the accurate analysis of developments on mobile markets. Many of the present skills are in technical aspects of regulation, rather than the application of pro-competitive policies.

A typical problem is the high switching cost for customers in the absence of Mobile Number Portability (MNP). The exorbitant International Mobile Roaming charges present a challenge that must ultimately be solved. A central regulatory problem is the high level of Mobile Termination Rates (MTRs) which is both complex and one where the operators are most sensitive. While these rates are generally far above costs, the effects of their reduction needs to be thoroughly understood. For the future, interconnection arrangements need to be designed to avoid such difficult and contentious issues.

Many complaints have been made about the poor quality of service and about the inadequate levels of customer care provider by operators. Such problems arise from the low levels of competition and the high degree of concentration and can largely be addressed by increasing competition.

There are also general concerns about the affordability of mobile telecommunications for large parts of the population. It is unlikely that GSM technology can be made affordable for everyone, while remaining viable for operators. Since long-term subsidies will not be affordable, alternative solutions will have to be sought.

Mobile network operators have criticized regulation as restricting investment and for failing to reflect local circumstances. They also criticise regulators for uncritically copying from developed countries, without consideration of local circumstances.  This has to be judged against their global pattern of politico-regulatory gamesmanship.

Africa can be treated as one unit or it can be divided between Middle East and North Africa (MENA) and Sub-Saharan Africa (SSA). It is also possible to divide the continent into the different colonial traditions with Arabic, Anglophone, Francophone and Lusophone groups. However, for mobile telecommunications it appears that the larger operators have extended their footprints across Africa and the Middle East, even as far as Afghanistan. It has allowed the operators to spread their risks and to maximize revenues from customers with limited disposable income.

While a few countries in Africa would be considered to have a low political risk, many are characterized by doubt and instability, war and strife. Nonetheless, mobile operators have entered these markets, constructed networks, generated revenues and acquired each other. Changes in government evidently do not result in the loss of licences or disadvantageous changes in regulation.

New challenges arise as we move into an era of broadband and Third Generation (3G) mobile telecommunications. It will be necessary to find the content to attract customers and that will generate the revenues needed to pay for infrastructure and handsets. That is likely to require an entirely different “enabling environment” with new regulations, including those governing acceptable content.

The performance of fixed networks is briefly analysed, followed by a detailed analysis of the growth of cellular wireless network in Africa, examining in particular the levels of competition and the economic benefits. These are then analyses of the large trans-national operators: Vodafone, Investcom, Millicom, Celnet, MTN and Econet. Conclusions are then drawn.

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