1. Interface between Competition Policy and Sectoral Regulation in the Namibia’s Telecoms Sector Rehabeam Shilimela NEPRU

2. 2 Outline  Background and Set-up  Regulation and Supervision  Market structures in the sector  Performance  Competition policy vs. sector regulation  Potential for greater competition  Conclusions

3. 3 Background & Set-up  Govt Department of Posts & Telecommunications dissolved in 1992 (commercialisation)  Posts & Telecommunications Companies Act (17 of 1992) established Telecom Namibia and NamPost  NamPost and Telecom Holdings (NPTH) – owns Telecom, NamPost and 66% of MTC established in terms of the same legislation  NPTH is a controlling structure for its subsidiaries – property development, cross-subsidisation etc.

4. 4 Background & Set-up (cont’d)  Performance Agreements – efficiency, infrastructure, employment, industry, more revenue for national priorities  MWTC responsible for Telecom and NamPost  MIB for NCC which regulates MTC and other communications sub-sectors (Radio, TV etc)  Cell One is also regulated by NCC

5. 5 Regulation and Supervision  Regulation by establishing laws  MTC and other communications (except Telecom) regulated by NCC, which was established to regulate the whole sector.  A controversial SOE Bill to regulate SOEs including Telecom. NCC regulates entry (not prices and standards) for Telecom as well.  1999 policy & regulatory framework – liberalisation by 2004 (Cell One)  Draft communications bill of 2002 – single statutory body: Communications Authority of Namibia (CAN)

6. 6 Market Structures  NamPost – Statutory monopoly rights for standard mail services  Telecom – De Facto monopoly for landline services. NCC did not award any licenses which it could have done since 2004.  Mobile sector – two operators with majority ownership by Government. Cell One just started operations covering Windhoek (clients can make international calls), to expand its network coverage across Namibia soon.

7. 7 Performance  NamPost – increased infra, tremendous growth in its savings bank - PA silent about non-mail standards, prices competitive - No info on unit costs, but cost over revenue ratio is rising  Telecom – Developed efficient infra, customer satisfaction weak, - call and service prices increased (real increases) - Job cuts (major) and salary distortions (high wages) - Higher operations costs despite infra (staff, wages),  Conclusion: good performance in terms on infra, but job cuts, wage distortions and rising service costs mean less benefits to the nation. Telecom has potential to pay dividends to Government.

8. 8 Competition policy vs. sector regulation  No sector is exempt from the Namibia Competition Act (2 of 2003), except that the minister of trade with concurrence of NaCC exempt by notice in the Gazette.  NaCC is likely to be instrumental in guarding against any collusions that are possible due to a spaghetti bowl of ownership stakeholders in the sector, also against abuse of dominant position (Cell One complained – SWITCH)  Namibia’s industry policy allows Govt to intervene – monopolies, competition  NaCC vs. NCC/CAN

9. 9 Recent developments in the sector  Amendment of NCC Act in 2004 – Authority to process applications, prescribe fees and other conditions  Portugal Telecom bought 34% of MTC shares in 2006  NCC allowed MTC to build its backbone infra, including VSAT in 2006 – partly eroding Telecom Namibia’s monopoly, but MTC’s application for intern-data gateway declined, maintaining Telecom’s de factor monopoly for international data and voice services  Telecom introduced SWITCH (cheap) - a fixed-wireless product (mobile technologies that do not allow roaming between cells) –Telecom planned to offer roaming, restricted to town/settlement area by Cabinet decision (27/02/2007)  Second mobile operator – Cell One started operations late March 2007

10. 10 Potential for greater competition  Service standards and prices have improved tremendously in the mobile telecoms sector  With an additional player, competition to intensify and improve terms  In absence of a competition regime, price war or even predatory pricing possible, but may not intensify since these are largely state firms  Things more complicated and slow in finalising SOE law and creation of CAN as a single sector regulator (institutional weaknesses and politics) as well as the need solicit additional landline operators or erode monopoly by allowing more rights to mobile operators.

11. 11 Rounding up  A de facto regulation vacuum for Telecom Namibia at present  Need for implementation of CAN and more denationalisation  Trade and competition laws would ease uncertainties associated with investment decisions  Namibia is lagging behind in terms of efficiency in the region, coupled with high profit margins (MTC) or high operating costs (Telecom Namibia) – these contributes to generally high costs of doing business  SWITCH adds to competition, but may constitute an unfair competition for other service providers (mobile, internet)

12. 12 END