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Four African countries try to turn back the clock by creating monopoly international gateways again
Balancing Act
Extracted from Balancing Act News Update 340
January 28, 2007

Licences for international gateways are the strategic heights of African telecoms competition. Some countries have liberalised access to them and will reduce licence fees (see Telecoms News). However four countries (Benin, Central African Republic, Sierra Leone and Zimbabwe) have tried to turn back the clock by creating a single monopoly gateway, taking away licences from other operators.

A 19th January Benin Counsel of Ministers communiqué announced that it was "determined to clean the telecoms sector in Benin once and for all. To do this the Government has no option but to return to basics". It said that the majority of operators are doing so without any license and that most authorisations issued by the previous Minister and arrangements made with Benin Telecom are not valid.

In this context, all VSAT operators, excluding private networks, offering services to the public are illegal. GSM operators having direct interconnect in Benin are illegal. GSM operators who have installed their own gateways to originate and terminate international traffic are doing so illegally. All WiMax; WiFi, VoIP services are illegal

And most pre-paid card sales are illegal.

According to the communiqué:" All these activities are happening to the detriment of the Republic of Benin and are viewed as economic crimes against the Republic. The financial losses Benin incurs as a result of this must stop with immediate effect". The purpose of the communiqué was to force operators to interconnect via the telco incumbent Benin Telecom and to make them route all international traffic through its gateway. The Government is also challenging the acquisition of Areeba by MTN and the change of Telecel to Moov on the basis that licences are issued to individuals and "cannot be transferred to any other person under Benin law."

Because of both staggering incompetence and wholesale corruption, the incumbent telco, Benin Telecom has debt totalling US$20 million. Although this has been restructured, the next payment is due in January so the Government is trying to acquire revenues to pay for the incumbent’s corrupt incompetence.

One industry insider told us: "The government initiative will fail or generate chaos in the telecoms industry. At present all the GSM traffic bypasses Benin Telecom’s infrastructure. There is no way that Benin Telecom can handle this level of traffic. If the government tries to enforce this measure it will be chaos. Benin Telecom’s infrastructure definitely can’t support it. The Government wants to forbid new technologies but I doubt that the government has the means to stop the usage of new technologies ".

Meanwhile the Sierre Leone Government is engaged in a similar campaign to create an international monopoly gateway for its incumbent telco, Sierratel. It has announced that by Mid-March of this year all mobile operators will route their traffic through the incumbent. Although the mobile operators lobbied vigorously against the move, it appears they have not been able to change the Government’s mind.

As with Benin, doubts exist as to whether Sierratel has the capacity or competence to handle all the current traffic of the mobile operators. One mobile operator told us:"It’s not only about the money, it’s also about the lack of control we will have over quality of service and prices." Every monopoly international gateway in Africa has had the impact of keeping the cost of international communications artificially high.

In Central African Republic a similar move was made in April last year under a contract operated by Amitelo’s Telsoft. After four months testing, it started receiving all international traffic from 18 September 2006 onwards. Prices for international termination were increased in October 2006.

Again fuelled by a desperation to keep a failing incumbent alive, the Zimbawe Government has been seeking to reintroduce a monopoly international gateway. It even went so far as to have a senior security official say that national security could only be guaranteed by having one gateway.

We have also learned that in neighbouring DRC that in an attempt to sell of the almost non-existent incumbent OCPT, the pre-election Government was prepared to offer a potential buyer the return of the international gateway monopoly.

This attempt to turn back the clock is fuelled by the financial desperation of the incumbent telco. However if (as in the case of Benin) neither Government nor Government-appointed management are capable of running a competent telco company, how will this be improved by creating a monopoly-protected area of business? Africa needs cheaper international communications to stay globally competitive. This will only be achieved as countries like Nigeria and Kenya know, through competitive international providers and privatised incumbent telcos.

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