Who will not be worried when Elon Musk comes to competition-town? “In a formal letter addressed to the Communications Authority of Kenya (CAK), Safaricom urged the regulator to consider requiring satellite providers to partner with local mobile network operators.” Yes, Safaricom had modeled that Elon Musk’s Starlink will just handover the bandwidth to it, and it can distribute to customers on its own terms. Unfortunately, Elon Musk does not work that way.
A report by the Kenyan Wall Street earlier this month disclosed that Starlink had initially approached Safaricom for a partnership before its entrance into the Kenyan market. However, Safaricom rejected the proposal citing concerns over regulatory oversight due to Starlink’s cross-border service model.
Recall that Safaricom in August this year, called for stricter regulations on Satellite Internet providers, amid Starlink’s entry into Kenya. In a formal letter addressed to the Communications Authority of Kenya (CAK), Safaricom urged the regulator to consider requiring satellite providers to partner with local mobile network operators.
And that is the challenge for Safaricom and other terrestrial players like MTN and Glo. There is no satellite company in the world that can match SpaceX Starlink on cost per bandwidth. Why? Only SpaceX has the capacity to design, implement, launch and distribute with all engineering done in-house. Other sat companies will require a launch partner if they’re able to design! And that asymmetric advantage will keep compounding for SpaceX.
Largely, you cannot find a better partner than Starlink on cost efficiency right now. That explains why suddenly Safaricom wants to partner with Starlink after seeing it as the bad guy across the street: “Peter Ndegwa, CEO of Safaricom, disclosed that the company is considering partnerships with Starlink …”
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That said, as satellite disintermediates the GSM era in Africa, regulators must make sure the American and European firms pay the right taxes. Telcos are rainmakers when it comes to taxes; we cannot afford to have a Netflix-like-tax system in Africa where the more you watch, the poorer the tax coffers become, because the local players are losing market share even when what is causing the loss has limited contributions to the tax system.
Starlink is free to replace the poor GSM networks but it must be required to pay adequate taxes!
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Comment: Totally agree on the tax angle. Hopefully regulators in Africa will wise up but you know Prof that the cost would eventually be passed to the consumers.
However, I am not sure Starlinks has any value to gain in partnering with Safaricom or telcos in Africa. On the long term, Safaricom’s and other local telcos real strength lies in focusing on complementary services that leverage their deep understanding of the local market and consumer needs—areas where Starlink cannot easily compete. By embracing the inevitable change and pivoting to value creation, Safaricom can turn this threat into an opportunity.
My Response: Before “complementary services” will have any value, you need to have the core service. Today, the core service is a quality network. With telcos declaring losses in Nigeria, they have limited funds to invest in capacity. That is the core service they are neglecting. If Starlink picks that, they will be disintermediated to the point that no one will care about the complementary services
Safaricom Reconsiders Partnership With Elon Musk Starlink, as Telecom Competition Hits in Kenya
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