Nairobi — Telecommunications market regulator Communications Commission of Kenya (CCK), is proposing new rules and regulations which will not only plunge the mobile telephone industry into a new era of tight price controls, but also force them to drastically change how they have been promoting their services.

Especially targeted by the strict regulations are sales promotions, special offers and other sales gimmicks, which have become integral parts of the aggressive tactics the companies use to attract new customers and retain loyalty.

The moment the new rules take effect, all promotions and special offer campaigns will only be allowed to run for a maximum of 90 days.

It will be a major point of departure for the mobile companies because some of the loyalty retention campaigns have been running for three years.

Under the proposed regime, companies must file all details of promotions or special offers with the CCK within 14 days before the campaign starts.

Special offers and promotions will only run after approval by the CCK.

Even more controversial are proposals to monitor and control tariffs. The rules stipulate that all tariffs charged by mobile phone companies will have to be approved by the CCK.

There is also a proposal to introduce what is known as price caps. Any mobile company with a dominant market share will have to observe an upper limit tariff set by the regulator.

Furthermore, tariff increases will be pegged on movement on the consumer price index.

The proposed regulations have been circulated to the stakeholders and are still subject to discussion and consultation.

In a conversation with the Saturday Nation, the chief executive of Safaricom, Mr Michael Joseph, described the proposed regulations as "draconian" and "anti-business", arguing that publication of the proposed rules had introduced regulatory uncertainty in the industry.

Zain also objected to some of the new rules the moment the draft regulations were circulated a fortnight ago.

Mr Joseph said that although the government had assured the industry that the draft regulations were subject to consultations by stakeholders, the fact that the government had gone ahead and published such draconian proposals in the first place -- while ignoring the potential damage to the image of Kenya as an investment location -- was a bad signal.

"I am worried about the damage to our industry and on the country's image," he said, pointing out that the publication of the draft regulations had the potential of causing negative consequences for the price of Safaricom's stock.

"Foreign investors are very sensitive", he noted, pointing out that it was unfortunate that issues were coming up just when Safaricom's share price at the Nairobi Stock Exchange was beginning to inch towards the Sh5 per unit level.

The big mobile companies have lately been under pressure to reduce consumer tariffs especially after Prime Minister Raila Odinga started a campaign to get companies to bring down inter-connect charges -- the fees which companies charge each other for traffic across networks.

In a letter to both Finance minister Uhuru Kenyatta and Information minister Samuel Poghisio, Mr Odinga ordered an immediate review of inter-connect charges, arguing that the rates were not in sync with global trends.

Mr Odinga said that the high inter connect charges had hampered affordability of mobile telephony services to customers in Kenya.

"Inter connect charges favour the dominant players and impede effective competition between operators," he said. Currently, it costs a Safaricom customer Sh15 a minute to call across networks, compared to Sh11 for Zain and Sh7.50 for Yu.

Although inter-connect charges have dropped drastically in the past five years, the gaps in cost of telephone calls within networks and across operators have become bigger and bigger.

Comparing consumer prices between players is a difficult due to complex tariff regimes.

But tariffs have recently tended downwards to an average of between Sh6 and Sh8 a minute.

Turning to the issue of inter-connect charges, Mr Joseph said that contrary to popular wisdom, a reduction in inter connect charges would not hurt Safaricom in any major way because the greatest proportion of its revenue was from calls made within its own network.

"More than 95 per cent of our revenues are from calls within our networks," he stressed, arguing that it was unfair to assume that the high interconnect charges worked to the advantage of the dominant player.

But as the dominant player, the company also benefits from the fact that customers choose Safaricom because most other people are on it.

Stung by what he sees as increasingly visible attempts in government to introduce regulation, Mr Joseph has been lobbying intensely -- seeing Mr Odinga to discuss what the industry sees as subtle attempts to take it to price controls.

The intense lobbying campaign has also seen Mr Joseph hold discussions with Mr Kenyatta, Mr Poghisio, head of Public Service Francis Muthaura, the director- general of the Communications Commission of Kenya, Mr Charles Njoroge, and the chair of the parliamentary committee on Energy, Mr James Rege.

With an 80 per cent market share, and with the government preparing to plunge into regulating what it sees as unhealthy market dominance, Safaricom is clearly going to face more pressure and criticism by politicians.

"But you must remember that I didn't set up to dominate, it's unfair to criticise me for doing my job well," said Mr Joseph, insisting that it was false to argue that Safaricom had a historical advantage over other players.

He argued that the dominant position had been earned by hard work, by constantly introducing innovative services and by maintaining superior customer service. "We had a competitor from the very beginning, we fought our way here," he protested.

How events play out in the coming months remains to be seen. But with the government appearing bent on enhancing the powers of regulators in pricing and competition, the likelihood is that dominant players such as Safaricom will continue to find themselves uncomfortably in the limelight.