9 March 2018

Namibia: Regulator Cran's Decision to Approve Sale of MTC Investor Stake Leaves Telecoms Sector All in Government Hands

analysis

London — Namibia is now one of Africa's strangest telecoms markets, having taken up position just below Ethiopia. Its regulator CRAN barred the sale of a 34% private investor state in MTC to Namibia Post and Telecommunications Holdings (NPTH) in November but has flip-flopped and allowed it to go ahead. Russell Southwood looks at what's happening.

In September last year I looked at what I called the topsy-turvy world of telecoms in Namibia.

It's a small market (with 2.48 million people) with just two operators: the historic incumbent Telecom Namibia and the formerly privately owned MTC. Telecom Namibia is owned through Namibia Post and Telecommunications Holdings (NPTH), a Government-owned investment company that also holds the real-estate associated with its telecoms investments in a separate subsidiary. The Government bought all but 34% of MTC.

Former mobile operator Leo was also acquired by the Government through Telecom Namibia and turned into a tower leasing company called Powercom. Its portfolio includes both the former Leo and Telecom Namibia Towers. After a lot of arm-wrestling with the independent regulator CRAN, Leo's mobile licence went to Telecom Namibia.

Under pressure from the EU around the EU Partnership Agreement negotiations, the Government has said it will put through an NPTH Dismantling Bill to dissolve the current telecoms assets holding company. The previous Information Minister Tjekero Tweya said:"The EU deemed this a monopoly and has wanted liberalization to include telecommunications." But he talked of the Government Institutions Pension Fund stepping in which would only transfer Government ownership to another entity. NPTH will be dismantled in February 2019.

The Namibia Competition Commission (NCC) said in late January it was against MTC and Telecom Namibia being owned by one company as it would reduce competitiveness. NCC chief executive Vitalis Ndalikokule said the NCC has prohibited the sale of shares to NPTH, and this was done with the public's input. At that point, he said it is now up to the Industrialisation Ministry to review the decision, and pronounce itself. "The ministry has four months to respond. So, there is still time."

The regulator CRAN did not explain why it had changed its mind but it is believed to have come under fairly intense pressure from the Government. The Act framing the creation of CRAN speaks of its duty to encourage competition. If that is the case, this is a fairly strange way to do it.

A report in The Namibian today Friday 9 March quoted an official familiar with discussions at NPTH saying that some CRAN officials believed that the way the current share purchase proposal is structured creates room for "outright corruption". The fear is that the shares will revert to Government after the dismantling of NPTH.

The Namibian also reports that the stake in MTC was offered to private investors in Nigeria, Angola and Britain. But only in the bubble of Namibian politics would you imagine that anyone would want a 34% stake in a market where the Government owns almost everything else that moves.

Why is this so bad? Government ownership encourages corruption and inefficiency, destroys price and service competition and makes it unnecessary to innovate.

The stake is said to be worth US$25.24 million and industry sources tell us that the plain is probably to float it on the local stock exchange, perhaps selling a total of 49% of MTC, the Government Institutions buying 20% and 29% being sold locally. In this circumstance Government would still maintain 51% control and have all the worthwhile spectrum and nearly all the customers.

So what's the point of the regulator if the market ends up this way? Well, it still has to look after the 12 ISPs and has oversight of state institutions and can rap them over the knuckles if they do things like collude over prices.

But if it can't stand up to Government on the sale of these shares, it seems unlikely they will have much sway in the future. It would then only be a matter of time before the state incumbent started squeezing out the smaller players who remain reliant on it for network infrastructure.

With the current state of the Internet and Telecoms market in Africa, what's happening in Namibia represents the nightmare scenario. Everything goes back to the state. But there are also other nightmares like a private mobile operator becoming the dominant player. African regulators and the markets they seek to regulate are beginning to look as if they are in crisis and no-one seems to have noticed.

Namibia

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