GSM Association applauds Kenyan gateway license decision

Call for better regulation in Sierra Leone

19th July 2006 - Johannesburg: The GSM Association (GSMA), the global trade association for mobile operators, has welcomed the Kenyan government's decision to grant international gateway licenses to its two mobile operators, Celtel and Safaricom. International calls for mobile users are already 50% cheaper for Kenya's six million mobile subscribers who previously had to connect through state owned Telkom Kenya's gateway, paying a large premium.

Tom Phillips, Chief Government and Regulatory Affairs Officer at the GSM Association comments: "This is a great development for Kenyan consumers who are already seeing improved services and greatly reduced prices for overseas calls. Liberalising international gateways removes a bottleneck that has been choking African businesses as they seek to compete in a global market. It also allows operators to interconnect at a regional level, leveraging existing infrastructure to provide better quality and more affordable services to consumers."The Kenyan decision contrasts with draft legislation in Sierra Leone, which threatens to return exclusive gateway rights to the incumbent fixed operator, SierraTel, thereby raising costs and compromising service levels. Phillips adds: "It is disappointing that the Sierra Leone government is considering such legislation. Not only does it threaten the service currently enjoyed by 350,000 mobile subscribers but also it goes against the pro competition principals endorsed by WATRA and ECOWAS. Sierra Leone would join Gambia as the only country in the region that maintains monopoly control of gateways and as such it risks missing out on the substantial economic and social benefits, and increased tax receipts, that competition brings."

Celtel, the pan-African operator, has businesses in both Kenya and Sierra Leone and can point to the great consumer benefits of international gateway liberalisation. Marten Pieters, CEO of Celtel International comments: "When Celtel received regulatory approval to connect its networks across the Congo B, DRC border, traffic between Kinshasa and Brazzaville increased 20 fold as we passed on cost savings to our customers."

The elasticity of demand for communication services is extremely high in Africa. A study by PriceWaterhouse Coopers has highlighted the critical impact that government regulation has on mobile operators' business plans and their ability to meet the demand for mobile services.

"Across Africa policy makers recognise that liberalisation has brought growth and investment not only to the telecoms sector but also to the wider economy, creating jobs and boosting GDP," added Pieters. "We know that foreign direct investment levels correlate strongly with the quality of the telecoms infrastructure and therefore call on the Sierra Leone government to reject the proposed amendment that threatens all stakeholders."

The GSMA points to the specific drawbacks of the proposed legislation:

* Creating a monopoly will destroy competition, increase prices and reduce efficiency. The demand for low cost, high quality services will not be met.
* Both consumers and business will suffer from higher costs. Fewer calls will be made and lower traffic volumes will reduce Government tax receipts from international calls.
* Creating a monopoly bottleneck will lead to traffic congestion and result in poor service quality on international calls.
* An advanced liberalised telecoms sector, such as that enjoyed by Sierra Leone, is a requisite for foreign direct investment. Returning the international gateway to monopoly control would send the wrong signal to international investors.

About the GSM Association

The GSM Association (GSMA) is the global trade association representing more than 690 GSM mobile phone operators across 213 countries of the world. In addition, more than 180 manufacturers and suppliers support the Association's initiatives as key partners.

The primary goals of the GSMA are to ensure mobile phones and wireless services work globally and are easily accessible, enhancing their value to individual customers and national economies, while creating new business opportunities for operators and their suppliers. The Association's members serve more than two billion customers - 82% of the world's mobile phone users.

Source: GSM Association