African politicians would like to persuade us that state telecommunications companies are a key part of closing the digital divide and joining the information societies. Because the rhetoric is warming and positive in intent, does not mean that we should believe them.
There are 31 countries where there is a state owned incumbent telco that is either dominant or has monopoly privileges that hamper the growth and efficiency of the market. Several of these countries are in political turmoil that makes it impossible to do anything about privatizing the incumbent telco. Others like Comores are going through the privatization loop again.
These state-owned incumbent telcos stand in the way of developing a country’s economy for a number of reasons. Almost without exception, they are poorly run and the quality of infrastructure and service they provide is sub-standard.
Because they are monopolies, they keep prices high for other players in the market: places like Angola, Cameroon, Ethiopia and Djibouti have some of the highest international, national wholesale and surprise, surprise, retail prices on the continent.
Below is our Top 5 that should be privatized in countries where it would have a huge impact:
1. Ethiopia: It is the North Korea of telecoms regulatory practice and maintains that what is now called EthioTelecom plays a crucial role in closing the digital divide. Its equipment and network procurement has been a mess and even with Chinese loans, it is still serving fewer customers than it might if it were in private hands. Prices remain high and things like the ban on SMS did not help market development for several years. It remains, more or less, the only company in the market whereas other more open economies have seen jobs and skills flourish. Rather cheekily, we’re going to add their traditional enemy Eritrea in here as it is the only telco without an international fibre landing station or any plans to build one.
2. Mozambique: It is currently going through a phase of talking about privatizing but don’t hold your breathe. Incumbent telco TDM retains a number of monopoly market privileges and charges neighbouring countries high transit prices for access to international fibre capacity.
3. Cameroon: There was one attempt to privatize Camtel and either the Government didn’t like the price or no-one came to the party. Despite the huge amount of pride some Cameroonians still have in Camtel, it is hugely inefficient and its monopoly control of both the landing station and national fibre networks mean prices are higher than they should be. It refused World Bank money to create a national wholesale fibre consortium and its market development has been delayed by not dealing with this issue.
4. Namibia: Telecom Namibia is one of those cozy unnoticed monopolies. The country is small and has a relatively high standard of living compared to many of its neighbors. It has a relatively well-equipped national infrastructure but keeps national wholesale prices high. In an act of hubris it had a commercial strategy to get involved in neighbouring telcos in Angola and South Africa. Like the investments of South Africa’s Telkom, these were without exception a disaster.
5. Zimbabwe: It hasn’t been for want of trying as the endless stream of rumors about potential buyers show. But the recent spat about whether an ISP can run VoIP services shows that there are still red lines in what is now otherwise a competitive market. The issue here is that the Government clearly wants more money than potential buyers are willing to pay. Something has to give and it’s probably the Government’s negotiating position.
Privatizing a state owned telco in the African context is about a Government making a commitment to having an efficient economy that will produce sustainable jobs. If it can’t make that commitment, what’s the point of all the warming blah, blah at the international conferences about them becoming information societies?
This post was written by Russell Southwood on his excellent Balancing Act newsletter as We Name The Guilty Men – Top 5 Monopoly Incumbents that Keep Prices High and Stall Market Development and is republished here with his permission
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