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Regulatory intervention or disruptive competition? Lessons from East Africa on the end of international mobile roaming charges

25 May 2011

A research paper written by Alison Gillwald, (Management of Infrastructure Reform and Regulation, University of Cape Town, Cape Town, South Africa, and Research ICT Africa, South Africa), Muriuki Mureithi, (Summit Strategies, Nairobi, Kenya). Published by Emerald Group Publishing Limited


Purpose – The purpose of this paper is to understand the conditions that enabled the end of roaming charges in East Africa in 2006, achieving in weeks what European regulators had struggled with for nearly a decade. To do so it aims to explore the factors that drove marginalized operator Zain to seize the competitive advantage created by it having licenses in three adjoining markets.

Design/methodology/approach – The paper draws on the theory of disruptive competition and innovation pioneered by Clayton Christensen to explain the innovative and disruptive nature of the Zain business model. It is drawn on to explain why, despite Zain being unable ultimately to dominate its competitors, it had a sustained disruptive effect on the entire market. This provides a theoretical lens through which to view the empirical evidence acquired through in-depth interviews and market analysis. This is used to develop a detailed case study on the dropping of roaming charges in East Africa.

Findings – The case study demonstrates the importance of an enabling policy and regulatory environment, which allowed operators to integrate historically separate national networks into cross-border operations, undermining roaming markets in the region and ending roaming charges in East Africa forever. With the high price of communications in East Africa and the premium charges placed on international mobile roaming, the effect of this move was to compel other regional operators to follow suit, and further, to institute various other pricing strategies in an attempt to retain or recover their dominant positions. As a result, not only did roaming charges disappear across major networks, but the prices of various other mobile services also fell as subscriber numbers soared.

Research limitations/implications – Research in this area is severely constrained by the inability to access pricing, traffic and revenue data from operators that is regarded as competitively sensitive. As a result it is often difficult to assess the immediate gains and losses of competitors and failure to get consistent data over time, the ability to assess lags and long-term positions. A longer term review of the impact of these developments on pricing and the dynamics of the East African market in future would provide valuable insight into the longer term effects of these developments.

Practical implications – As policy makers and regulators elsewhere in Africa start to emulate European “best practice” regulation, despite the difficulties mature and resourced regulators in the European Union face in instituting legally binding maximum tariffs for roaming, a valuable alternative policy and regulatory strategy exists in the creation of enabling competitive environments in which incentives to reduce to eliminate roaming charge, rather than retain environments in which international call termination on roaming phones can be arbitraged.

Social implications – Even though ultimately Zain was not successful as a disruptive competitor, it forced the dominant operators to reduce their roaming charges that resulted in sustained welfare gains.

Originality/value – This paper provides both novel theoretical insight and empirical evidence to explain the end of roaming charges in East Africa. It nuances perceptions in the popular and technical press that this was purely a market strategy that could be emulated anywhere else. It highlights the necessary enabling policy and regulatory environment that needed to be created and provides empirical evidence of the impact on competition in the market and analyses the outcomes of Zain's short term business strategy, against the longer term disruptive effect on the market.

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