Safaricom Economics A Wee Bit Flawed

 

Government could lose up to Kshs. 5 billion if the on-going cut-throat competition amongst the telecoms continues. The tariff wars have forced government to form an inter-ministerial committee to look into the issue although the Prime Minister told Parliament that competition was healthy and led to innovations. Already the falling calling rates have forced some of the telecoms to move into value added services like data as opposed to voice.

In my view Collymore and his band of green merry men at Waiyaki Way are blackmailing the government and I was shocked to hear the cheap arguments in parliament today advanced by some members of a parliamentary committee that Safaricom met yesterday as well as shareholders who see their prospective dividends disappear in the thin air. . A fall in VAT & excise duty collections, loss of jobs, unfair pricing, killing of “our own” multinational Safaricom, etc were advanced as reasons that should ensure government stops the competition.

If I could personify the tariff wars, what comes to my mind is a picture of four obese and gluttonous men sitting around a giant mountain of ugali with no shirts and dusty bare feet. . One of the gluttons is obviously bigger and older than the other three, his hands are bigger, faster and he already has the biggest side plate on the table. It means that his eating speed is higher than others and he also has the advantage of hording more on his side plate. The much younger and slower gluttons are trying to keep up with the giant’s speed to no avail.

What is surprising is that despite the obvious advantage, the giant is making a lot of noise and distracting everybody, he wants everybody to eat slowly and to chew and gulp in unison. When the others complain and request for all the ugali and stew to be put in one container, he refuses and starts wailing that the others are not fair and if they don’t listen to him everybody will have nothing to eat and the shopkeeper will suffer too if he has no one to sell his flour to. He reminds the others that even the cook may opt out and seek another more fulfilling career!  What flawed thinking!

I don’t blame Safaricom, because like every private enterprise, their motive is to create wealth for their owners and not increase government revenue!  What bothers me is that some of our MPs and even the media are buying into Safaricom’s flawed argument so easily. From a layman’s point of view, if my monthly expenditure on calls was Kshs.500, but suddenly because of lower rates I can suddenly make the same number of calls I usually make at only Kshs. 200, why should anyone be complaining? It shouldn’t be me at all because I now have Kshs. 300 I can use on other purchases or save. Government should come up with ways of ensuring the extra money in my pocket is directed to other purchases that can spur the economy. If my Khs. 300 is what builds the “losses” of Kshs. 5 billion in government revenue, I would expect the government to be happy and to go looking elsewhere and plug their revenue deficit.  Money in my pocket is not a loss. It is a gain for me the owner.

It is a well known fact that Safaricom is the biggest advertiser in the land and no self-respecting publishing or electronic media house will criticize them and hence the universal nodding in unison by all media houses. They wouldn’t threaten their advertising revenues. In the past Michael Joseph has fired complete departments and not a word finds its way to media. He once fired the whole finance department and procurement department, but no media house was brave enough to say a word.  So don’t expect any sober discussion other than Safaricom’s point of view. 

The only really independent voice in this would have been Parliament’s, but as they admitted today, they would rather hope Safaricom continues to dominate the market and rake in the obscene turnovers in the hope that someday in future their shares in the company might be cashed at a profit.

Shame on Safaricom- after years of overcharging us for calls, you now turn round and deviously keep us away from lower calling rates because it will affect your projections? With 15.7 m subscribers to all your combined competitor’s less than 5m, you should be content that you have corned a very big chunk of the market. Kenyans are very unforgiving  to when taken advantage of.   

So dear mobile subscriber, you are once again on your own.