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M Nxele – March04 Liberalistion, Commercialisation & Privatisation OVERVIEW OF LIBERALISATION, COMMERCIALISATION & PRIVATISATION By : M Nxele Programme.

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Presentation on theme: "M Nxele – March04 Liberalistion, Commercialisation & Privatisation OVERVIEW OF LIBERALISATION, COMMERCIALISATION & PRIVATISATION By : M Nxele Programme."— Presentation transcript:

1 M Nxele – March04 Liberalistion, Commercialisation & Privatisation OVERVIEW OF LIBERALISATION, COMMERCIALISATION & PRIVATISATION By : M Nxele Programme Co-ordinator Centre of Excellence for EA NAIROBI, 22nd – 26th March 2004

2 M Nxele – March04 Liberalistion, Commercialisation & Privatisation Removal of Laws and Regulations that restrict market competition Degree of liberalisation varies from region to region, country to country Pace of liberalisation can be varied Introduction /Implementation of Liberalisation can be phased Because of the Advance of Technology and availability of choice and close substitutes, liberalisation is near inevitable eg Fixed vs mobile; VOIP, Satellite Telephony LIBERALISATION

3 M Nxele – March04 Liberalistion, Commercialisation & Privatisation COMMERCIALISATION It is basically a Business Efficiency issue. It is about allowing an SOE to be run along sound Business Lines. Usually precedes privatisation. It is an image cleaning exercise designed to prepare an incumbent SOE for privatisation. You can commercialise without being privatised. During the phase of commercialisation, the SOE is owned by the Government but protected from competition by exclusivity clauses. Period of protection normally between 3 – 5 yrs. But can be more (eg. UK 8 yrs, Argentina 10 yrs, Kenya 5 yrs)

4 M Nxele – March04 Liberalistion, Commercialisation & Privatisation PRIVATISATION The Transfer of ownership of state enterprises to the private sector Essentially an Ownership Issue Part of SOE is sold to outside Investors. Normally between 30 % to 50% shares sold to outsiders You can privatise without competition

5 M Nxele – March04 Liberalistion, Commercialisation & Privatisation COMPETITION When there are a number of operators in the same market A feature of liberalisation New Technologies have undermined and eroded natural monopoly assumptions (Investment costs, substitute goods, economies of scale/scope, etc)

6 M Nxele – March04 Liberalistion, Commercialisation & Privatisation ADVANTAGES COMPETITION STIMULATES THE MARKET PRODUCTIVE EFFICIENCY Optimising costs of production and supply Strong incentives for technical improvements and better use of resources Variety of Services

7 M Nxele – March04 Liberalistion, Commercialisation & Privatisation DISTRIBUTIONAL EFFICIENCY Optimising overall market efficiency Competitive pricing, better marketing Customer focus Growth & Development Better quality Lower Tariffs, hence good for business and the economy ADVANTAGES …

8 M Nxele – March04 Liberalistion, Commercialisation & Privatisation DISADVANTAGES Competition is NEVER perfect Dysfunctional aspects of competition eg. Predatory Behaviour Driven by profit motive (not developmental) Market skimming No guarantees on the protection of Consumer Rights, Environment, Labour & Employee Rights, Industrial Relations IT IS THESE DISADVANTAGES THAT JUSTIFY REGULATION

9 M Nxele – March04 Liberalistion, Commercialisation & Privatisation COMMERCIALISATION, LIBERALISATION, PRIVATISATION AND COMPETITION have characterised the telecoms sector for the past 25 years.

10 M Nxele – March04 Liberalistion, Commercialisation & Privatisation COMPETITION IS NOW A GLOBAL PHENOMENON, ACROSS REGIONS, COUNTRIES AND SERVICES. AFRICA HAS BEEN AFFECTED AND POSITIVELY SO. For Example, THE CONTINENT HAS REGISTERED THE HIGHEST GROWTH IN THE MOBILE MARKET. The following tables highlight these trends:

11 M Nxele – March04 Liberalistion, Commercialisation & Privatisation GLOBAL TRENDS HAVE SHOW THAT MORE COUNTRIES ARE ALLOWING COMPETITION ON THE TELCOMS MARKET AS THE STATISTICS BELOW SHOW Source: ITU Telecommunication Regulatory Database. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% AfricaAmericasAsia- Pacific Arab States Europe MonopolyDuopolyCompetition Degree of competition in basic services

12 M Nxele – March04 Liberalistion, Commercialisation & Privatisation COMPETITION HAS BEEN THE NORM IN MANY SERVICES OF TELECOMS OUTSIDE BASIC SERVICES. BUT EVEN IN BASIC SERVICES, COMPETITION IS CREEPING IN Degree of competition by service Source: ITU Telecommunication Regulatory Database. 0% 10% 20% 30% 40% 50% 60% 70% 80% Basic services CellularCable TVISPs MonopolyDuopolyCompetition

13 M Nxele – March04 Liberalistion, Commercialisation & Privatisation COMPETITION …

14 M Nxele – March04 Liberalistion, Commercialisation & Privatisation ALTHOUGH MONOPOLY IS STILL STRONG IN BASIC SERVICES, COMPETITIONS INCREASING IN ONE OF BASIC SERVICES CORE AREAS, IE. INTERNATIONAL TRAFFIC. THE TABLE BELOW AMPLY DEMONSTRATES THIS PHENOMENAL GROWTH: 35% 46% 74% 85% Monopoly Competition Number of countries permitting more than one operator for international telephony Note: Analysis is based on WTO Basic Telecommunications Commitments and thus presents a minimum level of traffic likely to be open to competitive service provision. Source: ITU, WTO. Percentage of outgoing international traffic open to competition

15 M Nxele – March04 Liberalistion, Commercialisation & Privatisation COMPETITION HAS ALSO BEEN GROWING IN AFRICA AND QUITE RAPIDLY IN MOBILE

16 M Nxele – March04 Liberalistion, Commercialisation & Privatisation

17 M Nxele – March04 Liberalistion, Commercialisation & Privatisation OWNERSHIP PATTERNS ARE ALSO CHANGING AS GOVERNMENTS PRIVATISE THEIR INCUMBENT OPERATORS TO GAIN FULL ADVANTAGE OF THE BENEFITS OF RESTRUCTURING PrivateState-owned Countries Source: ITU Telecommunication Regulatory Database. Region% Privatized Africa 35 Americas 74 Arab States 29 Asia-Pacific 53 Europe 63 Privatisation Ownership status of the incumbent

18 M Nxele – March04 Liberalistion, Commercialisation & Privatisation Liberalising the Telecom Sector has become a reality of todays world. The fact that it is being enshrined in the WTO reinforces this reality. Those who accept this fact and proceed to implement privatisation stand a chance of doing so on their own terms. Procrastination, hesitation and lack of political will on the part of leadership may in the end prove costly. COMPETITION

19 M Nxele – March04 Liberalistion, Commercialisation & Privatisation Telecoms Organisations that privatised in the 90s did so during the time of the telecoms craze; they got good money, enthusiastic response, and growth results. Those who did not and those who hesitated are finding it hard to sell their incumbents. Nobody is very enthusiastic to buy a fixed network of hundreds of kilometres of copper wire and optical fibre. The true economic reality in this world is that you cannot win a fight against market forces. If you cant beat them, at least join them. Then try to beat them


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