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EDITORIAL: Let market forces guide growth in telecoms sector – Business Daily (press release) (blog)

EDITORIAL: Let market forces guide growth in telecoms sector – Business Daily (press release) (blog)

Editorials

Customers are served outside an Airtel shop in Mombasa. PHOTO | kevin odit | NMG 

Industry data showing that Airtel grew its market share significantly at the expense of the dominant Safaricom #ticker:SCOM is a welcome signal that free competition can work in the critical sector.

It is an outcome that should challenge the long-held view that Safaricom has cornered the market and the only way to protect consumers and ensure a level playing field for its rivals is imposition of new regulations on the giant telco, including proposals to break the company up.

The Communications Authority of Kenya (CA) latest data shows that Airtel’s share of voice traffic rose to 22 per cent in the last quarter of 2017, up from 13.5 per cent in a similar period the previous year.

That of Safaricom dropped from 80.6 per cent to 72.5 per cent in the review period, indicating that the leading telco was one of the casualties of Airtel’s advance.

Telkom Kenya also suffered a market share loss of 0.2 percentage points to 5.2 per cent.  

It is not clear how much Airtel benefited from opposition’s call for boycott of Safaricom’s products but — whatever drove customers to its shops — the telco should build on that momentum.

It would be desirable if market forces were the main drivers of market dynamics spurring innovation and reducing prices for consumers rather than regulations whose unintended consequences will be to weigh down the market leader and stifle growth.

It has not helped that Safaricom is the only profitable telco in Kenya and the major losses suffered by its rivals have only intensified fears that their collapse will leave the market leader as a natural monopoly.

While it may be tempting to help the underdogs, even at the expense of Safaricom, such plans may be premature.

The proposed merger of Airtel and Telkom Kenya, again, is purely a market development that is welcome.

While Safaricom should not be punished for its success, all the regulators need to do is maintain vigilance to ensure it does not abuse its dominance.

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