POLICY & REGULATORY CHALLENGES

1. POLICY & REGULATORYCHALLENGES Vitalis Olunga Chair GSM Africa/Safaricom Limited

2. GROWTH • Grew by over 50% in the year end 2003 reaching 53.4 million subscribers • The mobile subscribers reaching 65 million by end 2004 • Penetration rate of 6.4% • More mobile in over 43 countries • By end September GSM had reached over 1 billion customers spread in 208 countries globally ITU PPP FORUM KAMPALA 2004

3. Growth Drivers • Latent demand that could not be met by fixed networks • Changing Regulatory Framework with establishing regulatory authorities • Market Liberalisation • GSM Technological advantages enable fast network rollout and ease of customer acquisition • Investment policies and Opportunities ITU PPP FORUM KAMPALA 2004

4. Challenges • Market Liberalisation and segmentation Policies • Licensing procedure and inconsistent terms and conditions • Universal Access/ Service Policies • Interconnection Policies • Spectrum allocation policies and regulations • Government taxation policies • Government investment policies ITU PPP FORUM KAMPALA 2004

5. Market Segmentation • Long distance and backbone licenses and inadequate capacities • International Gateways Licensing procedure • VSAT Licensing for mobile backhaul and approach links • Market competition distortion by over intervention ITU PPP FORUM KAMPALA 2004

6. Licensing Policies and Conditions • Inconsistence licensing policies such as in areas of Long distance and backbone licenses • Direct regional interconnection links necessary for provision of roaming services • International Gateways Licensing procedure • VSAT Licensing for mobile backhaul and approach links • Market competition distortion by over intervention resulting in inadequate capacities ITU PPP FORUM KAMPALA 2004

7. Universal Service Access • UA Policies based on regional studies • High UA that makes the market unattractive • Regions are at different stages: • West Africa under ITU studies to harmonise the policies ; high UAF recommendations • East Africa: Kenya undergoing IDRC studies and recommendations • South Africa already implemented in many countries • North Africa- Some specific cases of high UAF • Contributions already made by the incumbent operators should be given due consideration ITU PPP FORUM KAMPALA 2004

8. Interconnection Regulations • Changing processes to introduce new regulations that could affect the market growth • Introduction of cost based interconnection in some markets where the technological changes has not taken place • Using to price cap and other methods that may not • Over intervention using benchmarking by the developed market data ITU PPP FORUM KAMPALA 2004

9. Spectrum Policies and Regulations • Implementation of IMT-2000 Spectrum allocation for GSM evolution in Africa • GSM900, GSM 1800 in Africa • Avoid Spectrum allocations for GSM to FWL • Rationalisation and harmonisation of charging principles • Differential charging to facilitate growth in rural areas ITU PPP FORUM KAMPALA 2004

10. Taxation & Investment Policies • Govern Taxes from customs duties; VAT on core network equipment • Zero rating of tax on terminal equipment ( mobile handsets) to make them more affordable • High corporate tax • Charges by other local government authorities on masks and other installations • Taxation on usage can only increase the end consumer price • Investment policies ITU PPP FORUM KAMPALA 2004

11. Growth Potential • Supply of affordable low-ended affordable handsets can be facilitated by reduced taxes • Much greater liberalisation essential segments • Much less protection of former state-owned operators in order that the new entrants can compete in a more even playing field • Much expert opinion to have the market attractive, not to have too many players in small markets • Use of market demand approach as opposed to political approach ITU PPP FORUM KAMPALA 2004