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Strong telecom market shows Somalia’s development potential

Developing Telecom
Friday, August 31, 2012

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It has long been reported in that Somalia plays host to a highly competitive mobile telecoms market. A recent report from Research and Markets has confirmed again Somalia’s unique market status.

Somalia is on the verge of gaining a central government for the first time since 1991. The Transitional Government is being disbanded following the troops of African Union countries’ ousting of Al Shabab militias from the capital, Mogadishu.

While Somalia is often held up as an example of the perils that result from a lack of government - and with good reason - free markets seem to have created their own order when it comes to telecoms. Without licensing barriers to entry, state-owned incumbents and regulatory burdens, numerous outfits have attempted to gain market share. The latest report estimates at least seven operators who also offer fixed-line and internet services.

With the lack of taxes and regulation, tariffs are some of the lowest in Africa. It remains to be seen how the new government will approach the issue of telecoms. Operators will likely favour making a tax contribution if it helps safeguard the rest of their profits and permits the development of infrastructure in other areas of Somalian life from which they will benefit.

While violence is all too real a prospect in Somalia, the social good provided by telecoms and deft manoeuvres in clan politics seem to have headed off any threat to telecoms operations. The regulation-free environment has led to a commonly reported figure of three days for new fixed-line connections.

There are some stumbling blocks to additional growth, however. Somalia is currently dependent upon satellite connections for broadband internet access because piracy prevents the connection of Somalia to submarine cables. Lack of a regulatory environment makes spectrum infringement and interconnection of networks real concerns.

It remains to be seen whether Somalia’s new government will ensure the stability needed make the unique Somalian market attractive to foreign investors.


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