Excise Duty Threatens Flashcom’s and Popote Wireless’ Survival

Flashcom LogoI am not much of an authority on Kenya’s telecoms sector but the recent announcement in this year’s budget that CDMA Wireless Operators in Kenya will now be subject to a 10% excise duty, much like the GSM Operators, will effctively kill the fledgling Flashcom and Popote Wireless businesses. Although Telkom Kenya operates a CDMA network as well, it has the benefit of a fixed line network that has NOT been affected by the excise duty. In addition, Telkom Kenya has the advantage of being majority owned by France Telecom which is well monied and has big plans for its Kenyan investment.

I am really concerned about this course of action since I admire bold entrepreneurial companies in Kenya and Africa in general that challenge the status quo by doing something new and exciting – creating a paradigm shift in the process. Flashcom and Popote Wireless are small companies in comparison to the telecoms giants that are Telkom Kenya, Safaricom and Celtel. In addition, the anticipated entry of the Orange GSM network by Telkom Kenya and Econet Wireless, what chance of survival do Flashcom and Popote Wireless have? In my humble opinion, are very slim.

I think the only way out for the two CDMA networks is to merge and look at the possibility of offering a value proposition that is very specifically unique from what the current (and expected) big boys of telecoms in Kenya have to offer. They could look at differentiating themselves by being very very customer service oriented since the likelihood of their client’s staying on is low when the prices rise to above that of the market rates for fixed line, GSM and CDMA competitor network operators. They could consider entering entirely new business areas such as application service provision, business process outsourcing, data storage, value added mobile services, etc. Its time to re-boot their DNA if they are to survive the coming telecoms storm in Kenya.

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