GOVERNANCE AND THE DIGITAL ECONOMY IN AFRICA
TECHNICAL BACKGROUND PAPER SERIES
State-Owned Enterprises in
Digital Infrastructure and
Downstream Digital Markets
in Africa
1
GOVERNANCE AND THE DIGITAL ECONOMY IN AFRICA
TECHNICAL BACKGROUND PAPER SERIES
State-Owned Enterprises in Digital
Infrastructure and Digital Markets in Africa
2
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
Acknowledgements
This Background Paper was prepared under the leadership of Georgiana Pop (co-TTL, Senior Economist,
and Global Lead for Global Competition Policy, Markets, Competition and Technology Unit of the World
Bank). The authors are Georgiana Pop and Davida Connon (Private Sector Development Specialist,
Markets, Competition and Technology Unit), with contributions from Gonçalo Coelho (Senior Competition
Policy Consultant) and Seidu Dauda (Economist, Markets, Competition and Technology Unit).
The paper draws on a new dataset on state-owned enterprises (SOEs) in the digital infrastructure and
mobile, wireless, international calling and data markets in Africa developed by Dennis Sanchez
(Economist, Markets, Competition and Technology Unit) in collaboration with Tania Begazo (Senior
Economist), Pascal Jaupart (Economist, Social Protection & Labor LAC), Andres Leonardo Sepulveda
(Consultant, Infrastructure, LAC), and Clara Stinshoff (Junior Professional Officer, Digital Development).
The data and analysis herein reflect the situation as of December 2021.
The team is grateful to Timothy Kelly (Lead Digital Development Specialist, Digital Development Africa
East, and South Unit) and Mariem Malouche (Senior Economist, Markets, Competition, and Technology
Unit) for excellent peer review comments.
Martha Martinez Licetti (Practice Manager, Markets, Competition and Technology Unit) provided overall
guidance and oversight.
i
Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
Table of Contents
Executive Summary.........................................................................................................................1
SOEs: their role in digital infrastructure and digital markets .............................................................4
Data Collection ............................................................................................................................. 10
SOE presence in digital sectors in Africa ......................................................................................... 11
SOEs and competitive neutrality in digital infrastructure and digital markets: policy considerations in
Africa............................................................................................................................................... 16
5.1. Overview ......................................................................................................................................16
5.2. Competitive neutrality in Africa’s digital sector ..........................................................................18
5.2.1 Streamlining the operational form of government business – separating commercial from non-
commercial activities of SOEs ..............................................................................................................18
5.2.2 Identifying the costs of any given function .........................................................................19
5.2.3 Achieving commercial rates of return .................................................................................20
5.2.4 Accounting for Universal and Public Service Obligations (USOs and PSOs) ........................23
5.2.5 Regulatory neutrality ...........................................................................................................23
5.2.6 Tax neutrality .......................................................................................................................26
5.2.7 Debt neutrality and outright subsidies ................................................................................27
5.2.8 Preferential treatment in public procurement ....................................................................29
Conclusion ....................................................................................................................................30
Annex 1: Questionnaire.................................................................................................................... 31
Annex 2: SOEs covered by the questionnaires (by country) ............................................................... 41
Annex 3: SOEs and weak competitive neutrality: impacts on markets and the implications for
development ...................................................................................................................................43
Bibliography ....................................................................................................................................46
List of Figures
Figure 1. Emerging market economies account for the increasing importance of SOEs (% of assets of
largest firm) .......................................................................................................................................... 4
Figure 2. Share of countries with at least one SOE present in the sector or subsector (advanced
economies (AEs) and emerging and developing economies (EMDEs)) .............................................. 5
Figure 3. Potential SOE impacts across digital markets where competitive neutrality is lacking ............. 9
Figure 4. Degree of state participation in SOEs in the 13 digital market segments studied ....................12
Figure 5. Number of SOEs that have activities in the various digital market segments studied, from
upstream digital infrastructure to downstream digital and data services ......................................14
Figure 6. Countries have higher overall scores on the GSMA Connectivity Index when SOEs face
competition in the markets in which they operate ..........................................................................14
Figure 7. Mobile services and devices are more affordable in countries where SOEs face competition in
the markets in which they operate ...................................................................................................14
Figure 8. Share of SOEs that are vertically integrated across more than one segment ...........................15
Figure 9. Percentage of SOEs that are either the largest or second largest company in the relevant
market segment..................................................................................................................................15
Figure 10. Share of countries that require SOE to separate commercial from noncommercial functions
.............................................................................................................................................................18
Figure 11. Share of SOEs receiving preferential access to finance from the government .......................28
Figure 12. Share of countries granting SOEs preferential access to finance ............................................28
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
List of Boxes
Box 1. Morocco and Tunisia require SOEs to separate accounts, which promotes a level playing field 19
Box 2. The European approach to defining a commercial rate of return .................................................21
Box 3. SOEs in the digital infrastructure sector in Africa rarely are obliged to achieve a commercial rate
of return ..............................................................................................................................................21
Box 4. Digital SOEs in Sierra Leone: soft budget constraints and poor market outcomes ......................22
Box 5. Digital SOEs in Angola: state monopolies, weak network coverage and low affordability ..........24
Box 6. De jure monopolies for SOEs regarding the ownership of digital infrastructure ..........................25
Box 7. Countries where SOEs benefit from preferential access to capital from the government ...........28
List of Tables
Table 1. Entry points for actions to increase competition in digital sectors with SOE participation ........ 2
Table 2. Country and number of SOEs analyzed for this paper .................................................................10
Table 3. Select market outcomes according to the GSMA Connectivity Index in countries with wholly
owned SOEs in the digital market segments studied .......................................................................12
Table 4. Competitive neutrality principles in digital markets ...................................................................17
iii
Executive Summary
This Background Paper examines the role and relevance of state-owned enterprises (SOEs) in the digital
economies in Africa and the potential risks to competition and market distortions. It builds on new data
that was collected on the presence of SOEs and the competitive environment in digital infrastructure and
mobile, wireless, international calling, and data markets. Detailed information was collected on 37 SOEs 1
from across 18 countries in the region to build an in-depth picture of the role and relevance of SOEs in the
digital economies of those countries, and the potential risks to competition that may exist.
SOEs play a significant role in specific digital infrastructure sectors and downstream digital markets, but
they benefit from various protections that may inhibit competition with and entry by private sector
actors. While SOEs are not a problem per se for competition and dynamic markets, the benefits that SOEs
may commonly receive as compared to private actors —and which are uncovered in this paper—risks
distorting the functioning of markets and have significant implications for the viability and profitability of
private companies. This is a phenomenon that exists across countries and regions, and the African
countries studied for purposes of this paper are no exception.
Overall, the policy and regulatory environment has evolved towards providing a level playing field to
SOEs and private sector operators; however, several aspects are worth highlighting for the policy
agenda in Africa, in particular:
- The degree of government ownership of SOEs in the digital infrastructure and mobile, wireless,
international calling, and data markets varies across countries; where state ownership is higher,
it appears that market outcomes may generally be lower. A closer examination of the data
revealed that 16 (around 43 percent) are wholly owned by the state, 6 (16 percent) are majority-
owned, and 15 (41 percent) are minority owned (10-25 percent). Countries with more than one
wholly state-owned SOE in the telecommunications sector also tend to exhibit the lowest scores
on the GSMA Connectivity Index both in the aggregate and in terms of network performance and
affordability (the level of mobile tariffs). For example, Comoros, Libera, and Sierra Leone all have
at least two wholly owned SOEs in upstream digital infrastructure sectors (backbone,
international landing stations, etc.)) and they are the weakest performers overall and exhibit the
weakest scores amongst these countries for mobile tariffs, which is supported by findings on
affordability, with each ranking 156th, 149th, and 129th out of 170 economies globally.
- Of the 37 SOEs surveyed across 18 countries, only one of the host countries, Tanzania,
systematically required SOEs in the digital sector to achieve a commercial rate of return in their
operations. SOEs operating in a commercial and competitive environment should be expected to
earn rates of return similar to comparable private businesses over a reasonable period, otherwise,
private actors can be undercut and crowded-out from the market. This may happen because the
SOEs operating within soft budget constraints could factor their low-profit margins into their
1 SOEs in this context includes all entities with 10 percent or more government ownership and operating in the digital
infrastructure, as well as mobile, wireless, international calling and data services markets. It includes SOEs with state ownership
as low as 10 percent (e.g., Ooredoo in Tunisia) as well as SOEs that are wholly owned by the relevant state (such as Angola
Telecom, AirtelTigo in Ghana and Fibernet in Mauritius).
Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
pricing. Further, SOEs could also exclude competitors by pursuing aggressive pricing policies
financed by the low profit, if not below-cost pricing.
- SOEs benefit from regulatory protections in many countries studied, which typically limits
private sector participation and disincentivize investment. For instance, SOEs in Angola, Benin,
Comoros, Gabon, Morocco, South Africa, and Tunisia manage essential facilities infrastructure,
even though they also operate in the commercial retail segments of the value chain—this creates
risks of self-preferencing if governments do not also have in place ex-ante regulation mandating
infrastructure sharing.
- 84 percent of the SOEs surveyed (in 72 percent of countries surveyed) are subject to full tax
liability in their home countries (i.e., subject to the same rate as private sector actors in the
same market segment). Evidence suggests that 11 percent of SOEs are granted preferential
treatment with respect to tax-credits or treatment when tax arrears exist, in Angola, Sierra Leone,
and Tanzania.
- Of the SOEs surveyed, it was reported that 19 percent of them benefit, either because of express
legal permissions or in practice, from preferential access to finance from the government, such
as through reduced interest rates, government-backed loans, debt guarantees, or capital
injections. At the country level, this amounts to 39 percent of the countries studied offering SOEs
preferential access to finance from the government. Financial benefits can raise risks particularly
when SOEs are vertically integrated across value chains, with downstream service providers
potentially able to access networks at reduced rates or even free of charge. Such benefits that are
not also available to private actors give SOEs a competitive advantage and allow them to price
more aggressively and potentially undercut private competitors.
- On the other hand, none of the countries studied maintain de jure asymmetric, preferential
conditions with respect to procurement processes for SOEs. Only Sierra Leone maintains a de
jure preference in the law in favor of domestic entities generally, which would benefit both
domestic SOEs and private entities over foreign bidders.
To the extent African governments wish to improve market outcomes, increasing competition can make
a positive difference. Governments would be advised to review the policy and regulatory environments
surrounding the operation of their SOEs and assess how best to create and uphold a level playing field for
actual or potential private actors. Where the rationale for SOE participation in the market is weak and the
services could be provided by the private sector, governments may wish to consider divestiture options
from existing SOEs or to consider ways to increase efficiency-oriented decision-making and operations
through private sector management contracts. Some high-level entry points for reforms are set out in
Table 1.
Table 1. Entry points for actions to increase competition in digital sectors with SOE participation
Topic Entry points for reforms Government agency
SOE oversight and Require SOEs to separate commercial activities SOE Oversight body/line ministry in
accountability for public from the delivery of any universal and public charge of SOE agenda /Ministry of
funding (if any), costs, service obligations (USOs and PSOs), and that telecoms/telecom regulators
and revenues to they utilize appropriate accounting
minimize to minimize mechanisms to identify the costs (and
market distortions revenues) associated with their various
activities, including PSOs and minimize the risk
of cross-subsidization of commercial activities
with public funds.
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
Topic Entry points for reforms Government agency
SOE incentives aligned Require digital sector SOEs to achieve SOE Oversight body/line ministry in
with productive commercial rates of return that are similar to charge of SOE agenda
efficiency comparable private businesses over a
reasonable period. Ministry of Telecommunications
SOEs subject to Remove any de jure monopolies granted to Sectoral regulators
competitive pressure by SOEs over the ownership and operation of (telecommunications/digital)
facilitating entry and digital infrastructure and the provision of
investment by the digital services. Ministry of Telecommunications
private sector
Remove other regulatory barriers to entry and
investment by private actors in digital market
segments, e.g., overly burdensome licensing
requirements, spectrum caps, etc.
Non-discriminatory Remove preferential tax rates or other forms Ministry of Finance/Tax authority
system of taxation of preferential treatment for SOEs that exist
under the law. Ministry of Telecommunications
Ensure that in practice tax arrears and
penalties are enforced equally against SOEs as
they would private actors in the same sector.
Equal access to finance Revise provisions in national budget laws that Ministry of Finance
for SOEs and private provide for direct on-lending to SOEs.
actors in digital market Ministry of Telecommunications
segments Adjust state-backed loan guarantee programs
and other forms of preferential financing that State-owned banks
are only available to SOEs, or make them
available to comparable private actors on the
same terms.
Make other direct subsidies for digital sector
firms (both public and private) available on the
same basis.
Non-discriminatory Adopt and implement laws, regulations, and Government ministries and other
public procurement guidelines for public procurement that do not public agencies (public
processes favor SOEs over private actors. procurement)
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
SOEs: their role in digital infrastructure and digital markets
State-owned enterprises2 (SOEs) play a key role in the economies of many countries around the world.
The International Monetary Fund (IMF) valued SOE assets at US$45 trillion in 2018, about half of global
gross domestic product (GDP), up
from around US$13 trillion in 2000.3 In Figure 1. Emerging market economies account for the
2012, the share of the total SOE sector increasing importance of SOEs (% of assets of largest firm)
value in Organisation for Economic
Cooperation and development (OECD)
countries was equivalent to 32
percent of GDP, with 58 listed and
1617 non-listed SOEs, whose market
value reached US$ 632 billion.4 The
role of SOEs globally has grown
significantly over the last two
decades—their share among the
world’s 2000 largest firms increased
from 5 to 20 percent between 2000
and 2018, driven mainly by the growth
of SOEs in emerging markets (Figure
1). Source: S&P Capital IQ; UNCTAD; S&P Global UDI Global Electric Power Plant
database; and IMF staff estimates, in IMF (2020). IMF Fiscal Monitor, at
Chapter 3, available at:
SOEs are found predominantly in https://www.imf.org/en/Publications/FM/Issues/2020/04/06/fiscal-
natural monopoly sectors such as monitor-april-2020#Chapter%203.
utilities and transport, including Note: This figure shows the share of SOE assets among the world’s 2000
water, gas, electricity, information largest firms.
and communication technologies, rail, and air travel, and with slightly greater frequency in emerging
and developing economies (EMDEs) (Figure 2). This occurrence plays out in upstream digital fixed
infrastructure and downstream digital communications and data services sectors across both advanced
economies (AEs) and EMDEs.5 According to OECD-World Bank Group (WBG) Product Market Regulation
(PMR) data, E-communications – fixed line networks (i.e., ownership and operation of backbone fixed
infrastructure), SOEs were present in 58% of EMDEs and 55% of AEs. SOEs are also found downstream in
more contestable digital communications services sectors including fixed-line and mobile retail services.
SOEs are slightly more common in EMDEs as compared to AEs in retail fixed-line services (58% in EMDEs
2 In this paper, SOEs includes entities with government participation of 10 percent or more. “State-linked enterprises” refers to
those SOEs with minority government participation of 10-25%: see World Bank Group (2023), ‘The Business of the State (Overview
booklet)’, available here: https://openknowledge.worldbank.org/handle/10986/40343
3 IMF (2020), at Chapter 3.
4 OECD (2016).
5 “Upstream” refers to the following: wholesale activities (maintenance and operation of mobile and fixed line communications
infrastructure), international gateway/landing stations (e.g. submarine cable, terrestrial cable, satellite), passive infrastructure
services (e.g. ducts, towers). “Downstream” refers to retail services (mobile and fixed line communications, including
international); mobile payment services; cloud and hosting services (e.g. website/email, datacenter collocation, cloud storage);
other data services (e.g. mobility analytics, cloud computing, IoT solutions); digital services on digital platforms (e.g. e-commerce,
ride hailing, e-commerce for farmers); other communications services (e.g. videoconferencing, contact centers).
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
versus 48% in AEs) and retail mobile services (46% in EMDEs versus 42% in AEs). 6 A more detailed analysis
of SOE presence in the digital infrastructure and services sectors is provided in Section 3.
Figure 2. Share of countries with at least one SOE present in the sector or subsector (advanced
economies (AEs) and emerging and developing economies (EMDEs))
EMDEs avg. (25) AEs avg. (33)
0% 20% 40% 60% 80% 100%
Water collection, treatment and supply
Air transport - air-traffic-control activities
Railways - operation of railroad infrastructure
Natural monopolies
Electricity transmission
Electricity distribution
Air transport - operation of airports
Operation of terminal facilities (such as harbors and piers)
Gas transmission
E-Communications - fixed-line networks
Gas distribution
Railways - passenger transport
Electricity generation
Electricity retail supply
Financial service activities, except central banking, insurance and pension fund
Other urban, suburban and interurban passenger transport
Railways - freight transport
Gas retail supply
E-Communications – retail fixed line services (voice, video and data)
Contestable sectors
E-Communications – retail mobile services (voice, video and data)
Gas import
E-Communications - mobile networks
Electricity export
Electricity import
Sea, coastal and inland passenger water transport
Gas storage
Air transport - international passenger transport
Air transport - domestic passenger transport
Gas export
Gas production
Sea, coastal and inland freight water transport
Gambling and betting activities
Motion picture distribution and projection
Accommodation, food and beverage service activities
Manufacture of fabricated metal products, machinery and equipment
Transport by Coach
Manufacture of motor vehicles and their parts and accessories
Building and repairing of ships and boats
Commercial sectors
Construction
Manufacture of aircraft and spacecraft
Manufacture of railway and tramway locomotives and rolling stock
Manufacture of refined petroleum products
Manufacture of chemicals and chemical products
Manufacture of pharmaceuticals, medicinal chemical and botanical products
Wholesale trade, incl. of motor vehicles
Manufacture of basic metals
Manufacture of computer, electronic and optical products
Road Freight Transport
Manufacture of tobacco products
Source: WBG-OECD Product Market Regulation Data (2018).
Note: AEs: Advanced Economies. EMDEs: Emerging Markets and Developing Economies. The percentage reflects averages
across 25 AEs and 33 EMDEs indicated in parentheses as being covered by the 2018 PMR database.
6 Contestable sectors in EMDEs are marginally more likely to have an SOE, as is the case in financial services (~85% in EMDEs as
compared to ~75% in AEs) and retail fixed line services (~60% in EMDEs compared to ~50% in AEs). However, EMDEs are much
more likely to have SOEs in traditionally commercial sectors, such as accommodation, food and beverage (~60% for EMDEs,
compared to ~30% for AEs), construction (~50% for EMDEs, and <20% for AEs), manufacture of refined petroleum products (>60%
for EMDEs, compared to <20% for AEs), and wholesale trade, including motor vehicles (~45% for EMDEs, compared to ~15% for
AEs).
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
According to the principle of the subsidiarity role of the State in the economy, the establishment and
operation of SOEs are generally justified by the existence of market failures – specifically for addressing
situations where the private sector would not provide the good or service in a competitive and efficient
manner without some form of government intervention . However, in cases where the private sector
could provide the service/good competitively and efficiently, the presence of an SOE is harder to justify
from an economic perspective – and the potential negative effects on the market and development of the
private sector could be more pronounced. In markets where private sector participation is more common
or likely, it is typically more efficient and effective for the State to act as a regulator.
Natural monopolies are a market failure that is frequently invoked as a justification for SOEs. However,
even though natural monopolies do not involve competition among different companies in the market,
there is still the possibility to introduce competition in the market and create competitive pressure for
publicly-owned incumbents.7 In this regard, the Government could, for instance, award a concession for
the exploitation of a natural monopoly activity through an open tender procedure. Concessions allow
Governments to periodically introduce contestability in a natural monopoly segment and to receive
revenues from the concessionaire without necessarily having to privatize a particular economic activity.8
That said, the political economy challenges involved in reforming SOE-dominated sectors can be
significant, due to inertia, vested interests and regulatory capture, and a general political attachment to
state ownership.
Neither the number of SOEs nor their footprint in the economy is per se conducive to or harmful for
competition or positive market outcomes. However, there is a wide variety of policies typically associated
with SOEs that can potentially distort the functioning of markets and have significant implications for the
viability and profitability of private companies. Policies that tilt the playing field in favor of specific market
players, particularly SOEs over their private peers, can create undue competitive advantages and hinder
competition. These policies can take different forms such as preferential access to financing, reduced fees
for accessing State property, subsidies, or compensation mechanisms that are not available under similar
conditions to the private sector. Distortions can also emerge from the regulatory framework (e.g., price
regulation), from situations where SOEs are not subject to the same market discipline as the private
operators, and when SOEs perform simultaneous functions as market providers and as regulators.
Digital markets are also characterized by certain bottleneck features, making ex-ante regulation
important to ensure access to key infrastructures and resources irrespective of firm ownership. Due to
their market characteristics – especially, high network effects and returns of scale – digital markets show
a propensity towards increased consolidation and entrenched market power. Digital markets, particularly
the upstream telecommunications sector, are characterized by a small number of operators due to the
high upfront investment costs and economies of scale involved and are thus often described as “natural
oligopolies”. For example, the deployment of fiber-optic cable can cost as much as US$70,000 per
kilometer.9 Because competition law is insufficient to effectively tackle high and non-transitory entry
7Kowalski et al. (2013).
8OECD (2019).
9 GSMA (2019).
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
barriers, considering ex ante and ex post regulation for operators with significant market power 10 (SMP),
especially in upstream digital infrastructure, can promote competition in the market.11
An effective ex-ante regulatory framework is especially important to ensure incumbents – historically
with close links to the State – do not exclude rivals through anticompetitive conduct and are subject to
the same market conditions as private actors (actual or potential) in the market . The principle of
competitive neutrality requires that all enterprises, public or private, domestic or foreign, face the same
set of rules, and where government’s ownership or involvement in the marketplace, in fact or in law, does
not confer an undue competitive advantage on any actual or potential market participant.12 In practice,
and as set out in the World Bank Integrated SOE Framework (iSOEF) 13 and the World Bank Finance,
Competitiveness, and Innovation GP’s SOE Knowledge and Methodology notes for Country Private Sector
Diagnostics, this means that SOEs should be required to operate in accordance with commercial
considerations and hard budget constraints (e.g., earn a commercial rate of return, not cross-subsidize
commercial activities with public funds received for public service delivery, ensure transparency of
accounts and separate costs/revenues for each activity) and should not receive preferential treatment as
compared to non-SOEs (e.g., regarding access to state support and public contracts, 14 tax neutrality,
regulatory neutrality, debt neutrality).15 More detail on the contours of competitive neutrality (along with
findings regarding its implementation in African digital infrastructure, mobile, wireless, international
calling markets, and downstream data markets) is discussed in Section 4.
Without an effective ex-ante regulatory framework in line with the principle of competitive neutrality,
SOEs present high risks of distorting markets, stifling competition, and crowding out the private sector.
Formal government rules or implementation actions may exist to protect SOEs from competition:
Whatever the sector, SOEs frequently receive exclusive preferential regulatory treatment and/or
subsidies as compared to their private sector counterparts, reducing the possibility of new private sector
investments. Ultimately, the disparate treatment creates an unlevel playing field between SOEs and
private companies in the markets in which they operate. This can distort competition and crowd out the
private sector not only in the market segment in which the SOE operates but across entire value chains if
firms upstream or downstream benefit from subsidized production of goods and services ( Figure 3 and
Annex 3: SOEs and weak competitive neutrality: impacts on markets and the implications for development).
Vertical integration of SOEs across value chains is also problematic, for example, where SOEs in upstream
market segments such as the operation of digital fixed and mobile infrastructure, also operate (or work
directly with other SOEs) in downstream segments such as mobile, wireless and international retail
10 In some countries, significant market power (SMP) is determined solely in accordance with formal market share criteria.
However, good practice is to use a purely substantive test consisting in determining whether an operator has the capacity to act
independently from consumers and competitors to a large extent. See, for example recent draft guidelines on SMP that have
been developed by the European Commission.
11 It is important that markets are reviewed periodically in order not to regulate outdated markets where SMP operators exist
(e.g. Bénin sets forth a periodic review of telecoms markets every three years. See Pop & Coelho (2020). See also:
https://www.itu.int/dms_pub/itu-d/opb/pref/D-PREF-TRH.1-2020-PDF-E.pdf
12 OECD (2015).
13 The World Bank’s Competitive Neutrality Gap analysis, which forms part of the World Bank’s Integrated SOE Framework (iSOEF),
examines policy and regulatory frameworks in markets in which SOEs operate. See World Bank (2019a).
14 State support measures include: direct transfers or grants, tax exemptions, capital injections, equity participation, soft loans,
deferral of tax payments, subsidies, guarantees, land transfers or leases, free or below-market pricing, privileged access to
infrastructure, free or subsidized fees, among others. State support measures should be based on transparent, non-selective, and
non-discriminatory criteria.
15 The World Bank’s Competitive Neutrality Gap analysis, which forms part of the World Bank’s Integrated SOE Framework (iSOEF),
examines policy and regulatory frameworks in markets in which SOEs operate. See World Bank (2019a), Module 1.
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
services, as it creates opportunities for anticompetitive behavior, market foreclosure, and cross-
subsidization.
Through ex ante regulation, regulators can impose remedies on operators with SMP 16 - be they SOEs or
private firms - which operate in markets where the risks of anticompetitive conduct are high, notably
in upstream digital infrastructure. For instance, subject to the imposition of competition safeguards,
sector regulators can impose obligations regarding the sharing of passive and active infrastructure by
operators with SMP, thus facilitating market entry and expansion by smaller operators. By the same token,
regulators can mandate that operators with SMP host mobile virtual network operators (MVNOs) that
would otherwise be unable to gain access to a mobile network. Other common remedies include providers
with SMP engaging in cost-based pricing, engaging with buyers/suppliers in a non-discriminatory manner,
and upholding transparency in their operations (e.g. publication of reference offers). The remedies should
aim to correct the risks of anticompetitive behavior while minimizing intrusion into how the market would
otherwise operate.
With the growth of digital platforms and rising competition from internet service providers, the
development and scope of SMP regulation are changing. Traditionally, SMP regulation has been
developed based on (i) defining the market to be regulated, (ii) a determination of what constitutes
dominance or SMP in that context (usually considering revenue-based market shares due to ease of
quantification and validation)17 , and then (iii) selection of appropriate remedies for ex-ante imposition
on SMP suppliers to discourage/prevent anticompetitive behavior.18 This approach has had to change,
however, with the advent of digital platforms and rising competition from service providers that operate
independently from telecommunication network operators. By way of summary, markets can no longer
be presumed to be national in scope and relevant data is difficult to obtain from global market
participants, defining markets is complicated by the presence of two-sided digital platforms, “free”
internet services make it difficult to assess market power and the power to act independently from others,
and positive network effects mean that one dominant player in a market may no longer be undesirable
(or avoidable). As a result, a broader range of indicators is needed to define and identify SMP suppliers
that should be subject to ex-ante regulation, including, for example, access to data, innovation, barriers
to entry, and barriers to expansion. Moreover, some of the behaviors that SMP regulation may previously
have tried to discourage or prevent are now arguably legitimate business models. 19
Further, competition in mobile communications depends upon the adoption of a market-based and pro-
competitive regulatory framework governing spectrum management. Pursuant to such a framework,
spectrum should be assigned through auctions and traded in secondary markets so that it is placed in the
hands of the operators that value it the most. Secondly, to counter the risks of spectrum hoarding by
operators with market power, it might be necessary to put in place pro-competitive regulation that fosters
spectrum access by smaller players (e.g. spectrum caps, set-asides, or the creation of a wholesale open
16 In some countries, significant market power (SMP) is determined solely in accordance with formal market share criteria.
However, good practice is to use a purely substantive test consisting in determining whether an operator has the capacity to act
independently from consumers and competitors. For more detail see International Telecommunication Union (ITU)-World Bank
(2020).
17 Regulators can consider other factors in determining dominance/SMP, such as market concentration, access to finance,
economies of scope, technological advantage, and the prospect of countervailing buying power.
18 Ex-post remedies (i.e., through the enforcement of the competition law) would also available where specific instances of
anticompetitive behavior are identified, such as predatory pricing or exclusionary behavior.
19 For a more detailed discussion see International Telecommunication Union (ITU)-World Bank (2020).
8
Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
access network (WOAN)).20 It is also important to have enough spectrum allocated for unlicensed use, as
this creates opportunities for green field development and reduces entry barriers for downstream digital
businesses that require spectrum to operate. 21
Finally, a strong ex-ante regulatory framework facilitating data access may ensure markets do not tip
into situations of entrenched market power . Some of the regulatory options available include facilitating
multihoming (use of multiple platforms for the same service); the right to portability of personal data (in
essence, the right to move personal data between different controllers); data interoperability (the ability
for different systems to share and use data in a coordinated and timely manner); and encouraging data
sharing or pooling schemes (where two or more firms agree to merge their data for access by themselves
and possibly third parties).22 23
Figure 3. Potential SOE impacts across digital markets where competitive neutrality is lacking
Source: World Bank Markets & Competition Policy team elaboration
Ensuring that public and private operators operate under the same rules and opening-up digital
infrastructure and mobile, wireless, and international calling markets, as well as downstream data
services, to potential private sector entry can have an important impact on growth and
competitiveness. A 1 percent increase in telecommunications access in ECOWAS countries has been
20 Set-asides: remove the incumbent from the bidding process and one or more blocks of spectrum are reserved for a specific
type of bidder, such as a new entrant, a smaller operator or a designated entity or group (e.g. minorities, SMMEs, etc.); Spectrum
caps: limit the maximum quantity of spectrum that can be held in a specific geographic area. Caps can be applied either to an
individual auction or, in more general terms, to a category of radio frequencies. Spectrum caps allow entrants to bid for larger
quantities of newly available spectrum, and limit “excessive” concentration of spectrum by incumbe nts; A WOAN consists of a
network that provides wholesale services, in accordance with open access principles, such as transparency and non-
discrimination, either on a voluntary basis or under a mandated access regime. See Pop, G. & Coelho, G. (2020).
21 African countries with guidelines for the unlicensed use of spectrum include Mali, Nigeria, The Gambia and Togo. See Pop &
Coelho (2020).
22 World Bank (2021).
23 For a more detailed explanation the role ex ante regulation to promote competition in digital infrastructure and downstream
digital markets, see Coelho, G. and Pop, G. (2021).
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
shown to lead to an increase in relative real GDP of 0.0003 percent;24 similarly, mobile phone ownership
and use have been found to significantly improve agricultural productivity.25 Furthermore, increasing
competition in digital infrastructure by incentivizing market entry and deterring anticompetitive behavior
was indicated to have potentially sizeable welfare impacts through reduced prices. 26 Meanwhile, opening
up international calling services to competition was found to reduce prices by 90% and increase call
volumes by anywhere from 32 to 104%.27 Moreover, greater spectrum harmonization across the African
region could yield substantial gains. For instance, recent analysis on the impact of spectrum harmonization
of mmWave (between 24 GHz and 86 GHz) for 5G technologies shows a potential impact of around US$5.2
billion, with tax revenues of nearly US$1 billion for Sub-Saharan Africa.28
Data Collection
For purposes of this paper, new data was collected on SOEs in the digital infrastructure and mobile,
wireless, international calling, and data markets in Africa. Detailed information was collected on 37
SOEs29 from across 18 countries in the region in order to build an in-depth picture of their role and
relevance in the digital economies of those countries (Table 2). For the data collection, a questionnaire
(see Annex 1: ) on SOEs was prepared based on the World Bank’s Corporate Governance Toolkit (2014),
the World Bank Integrated SOE Framework (Module 1 on SOEs and the Market: Considerations for
Policymakers), and FCI’s Knowledge and Methodology notes on SOEs in Country Private Sector Diagnostics
The questionnaire included eight sections
to capture information Table 2. Country and number of SOEs analyzed at the sectoral (e.g.,
regulations) and firm- for this paper level (e.g., financial and
operational data). The eight sections included
several components to Country Number of SOEs studied understand the role of
the SOE in the markets, Angola 3 the regulatory
environment Benin 1 surrounding the SOE
operations, the control Comoros 2 and oversight settings,
as well as market Egypt 2 characteristics and
outcomes, among Eswatini 1 others, which are
important to reduce Ethiopia 1 market distortions and
corruption and integrity Gabon 2 risks associated with
SOEs. Ghana 3
Kenya 1
Liberia 2
The data collection was Mauritania 1 led by the WBG and
Mauritius 3
conducted by two law firms across the region.
Morocco 2
Information was ultimately collected on
Mozambique 1
37 SOEs across 18 countries (Table 2).
Sierra Leone 2
Several consultations and data verification
South Africa 4
procedures were Tanzania 2
implemented to ensure
the quality and veracity Tunisia 4 of the information
24 Ossadzifo (2018). See also: Alam, Sultana and Rayhan (2019).
25 Issahaku, Musah Abu and Kwame Nkegbe (2017).
26 Decoster et al. (2019).
27 GSMA (2015).
28 GSMA (2018).
29 In this paper, SOEs includes entities with government participation of 10 percent or more.
10
Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
provided. Finally, the team systematized the responses for the assessment in a single database.
SOE presence in digital sectors in Africa
As discussed in Section 2, state ownership is not problematic per se, but SOEs are often associated with
a variety of preferential, market-distorting policies that can compromise private sector viability and
profitability. The countries with the most SOEs in the digital infrastructure and downstream mobile,
wireless, and international communications, as well as data services include South Africa, Angola, Libya,
and Tanzania. A subset of 37 of these SOEs in 18 countries were studied in detail for this paper.
In terms of the degree of government ownership, just under half of the 37 SOEs are wholly owned by
the state, and the degree of state ownership appears to be associated with digital market outcomes.
Specifically, 17 (around 46 percent) are wholly owned by the state, 6 (16 percent) are majority owned, 14
(38 percent) are minority owned (less than 50 percent), and 4 of those (11 percent overall) and so-called
SLEs, with state ownership under 25 percent. (Figure 4). Where state ownership is higher, it appears that
market outcomes may generally be lower overall. For example, the 12 countries with wholly owned SOEs
score 43.5 on the GSMA Connectivity Index30 overall, which is slightly below the average for all 18
countries studied for purposes of this paper (45.2). By comparison, the 11 countries hosting SOEs with
minority state ownership (below 50 percent) have an average GSMA Connectivity score of 51.6. The score
is higher still considering those countries hosting SLEs (where the state owns 25 percent or less of the
entity)—in those cases, the average GSMA Connectivity score is 54.85 percent. Network performance is
also relatively stronger in countries with SLEs (48.96), as compared to the average score for the 18
countries studied (38.04), and the score for those countries with wholly SOEs (37.41). The picture is similar
with mobile tariffs: countries with wholly SOEs score on average considerably lower (36) as compared to
the 18 countries studied overall (41), the 11 countries hosting SOEs with minority state ownership (below
50 percent) (54.4), and the 3 countries with SLEs (62.7). This may indicate that where there is greater
private sector participation in digital sector SOEs, incentives may be better aligned to deliver higher-
quality services.
30The GSMA Connectivity Index measures the performance of 170 countries, representing 99% of the global
population, against the key enablers of mobile internet adoption: infrastructure; affordability; consumer readiness;
and content and services. For more information, see: https://www.gsma.com/r/somic/. Full details of the methodology and
data sources is provided in GSMA (2020). A higher score always means “better” performance with respect to the underlying
indicators: i.e., higher quality infrastructure, faster download speeds, lower prices, higher mobile penetration, etc
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
Figure 4. Degree of state participation in SOEs in the 13 digital market segments studied
41% 43%
16%
Wholly state-owned Majority state-owned
Minority state-owned
Source: World Bank Markets, Competition and Technology Unit, Database of SOEs in Digital Sectors across Africa.
Countries with more than one wholly state-owned SOE in the telecommunications sector also tend to
exhibit the lowest scores both in the aggregate and in terms of network performance and the level of
mobile tariffs. For example, Comoros, Libera, and Sierra Leone (each of which has at least two wholly
owned SOEs in upstream digital infrastructure sectors (backbone, international landing stations, etc.)) are
the weakest performers overall and exhibit the weakest scores amongst these 11 countries for mobile
tariffs, which is supported by findings on affordability, with each ranking 156 th, 149th, and 129th out of 170
economies globally (Table 3).31
Table 3. Select market outcomes according to the GSMA Connectivity Index in countries with wholly
owned SOEs in the digital market segments studied
GSMA Connectivity Index
Network Mobile Affordability
COUNTRY SOE Overall Score Performance Tariffs (sub- (sub-score)
(sub-score) score)
Angola Angola Telecom 43.53 47.79 45.07 47.65
Benin Benin Telecom 39.07 30.39 24.71 33.63
Comoros Comores Telecom, Comores Cables 23.98 16.29 13.05 10.74
Eswatini Posts and Telecommunications
Eswatini 39.20 42.29 41.15 39.79
Corporation
Société de Patrimoine des Infrastructures
Gabon 48.71 35.10 57.09 42.49
Numériques (SPIN)
Ghana AirtelTigo, National IT Agency 52.01 35.22 61.44 48.40
Cable Consortium of Liberia, Liberia
Liberia 34.43 39.47 7.46 22.92
Telecommunications Corporation
Mauritius National Computer Board 65.75 44.80 57.37 63.91
31 Comoros, Liberia and Sierra Leone scored 10.74, 22.92, and 38.96 out of 100 respectively.
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
Mauritius Fibernet 65.75 44.80 57.37 63.91
Sierra Sierra Leone Cable Limited, Sierra Leone
38.57 45.56 14.35 38.96
Leone Telecommunications Company
South
Broadband Infraco 60.14 51.54 58.28 51.72
Africa
Tanzania Telecommunications Corporation
Tanzania 40.11 36.24 32.37 34.21
(TTC)
Source: GSMA (2020)
In terms of their activities and across the 13 market segments that were studied,32 the majority of SOEs
surveyed were active predominantly in the following market segments: international communications
infrastructure, fixed infrastructure, such as backbone, and the provision of fixed communications
services to end users (Figure 5). These SOEs are typically active in more than one market segment (i.e.,
they are vertically integrated to some degree along the value chain – discussed in more detail below).
Around 73 percent (27) of the 37 SOEs analyzed own and provide access to fixed backbone infrastructure.
Approximately 65 percent (24) are mobile network providers in the African region. SOEs are also quite
active downstream in data infrastructure and services markets, such as cloud and hosting services (49
percent of the SOEs studied have activities in this market segment), mobile payment services (43 percent),
and digital platform services, such as e-commerce, ride-hailing, or e-commerce for farmers (35 percent).
Especially when SOEs operate in traditionally commercial or contestable sectors (see again Figure 2 above)
that are more conducive to private sector participation, there is a need to ensure a level playing field
between all operators, to ensure that SOEs or private firms are not benefiting from preferential treatment,
that they are subjected to competitive pressure, and that they are properly incentivized towards greater
productivity and higher quality service delivery.
Across the 37 SOEs and the 13 market segments that were studied, some 41 percent of SOEs (15) were
the sole operator in at least one of the market segments in which they operate —predominantly in fixed
communications retail services (including voice and data), and fixed infrastructure and related wholesale
services (backbone infrastructure, leased lines, metropolitan networks). SOEs faced private sector
competition predominantly in retail and wholesale services for mobile communications (voice and data),
with 23 SOEs (62 percent) facing private competition in this sector, and the second most significant
segment for private competition was fixed communications retail services, though only 12 of the SOEs
studied faced private competition in that segment. Countries with SOEs that face competition in the
market segments in which they operate (i.e., the SOEs are not sole operators) tend to exhibit better
market outcomes as measured by the GSMA Connectivity Index overall and the GSMA Affordability
Index—in other words, the higher the average proportion of market segments with SOE participation
where the SOE is the sole operator, the poorer the market outcomes (Figure 6 and Figure 7).
32 Market segments studied for purposes of this paper were: a. Mobile communications retail services: voice, data (Internet),
messages; b. Mobile communications wholesale services; c. Fixed communications retail services: voice, data (Internet); d. Fixed
communications wholesale services (e.g. fiber backbone infrastructure, leased lines, metropolitan networks); e. International
communications: voice, data; f. International gateway/landing station (e.g. submarine cable, terrestrial cable, satellite); g. Passive
infrastructure services (e.g. ducts, towers); h. (Mobile) payment services; i. Cloud and hosting services (e.g. website/email,
datacenter collocation, cloud storage); j. Other data services (e.g. mobility analytics, cloud computing, IoT solutions); k. Digital
services on digital platforms (e.g. e-commerce, ride hailing, e-commerce for farmers); l. Other ICT services (e.g.
videoconferencing, contact centers); m. Other non-ICT services (e.g. real estate).
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
Figure 5. Number of SOEs that have activities in the various digital market segments studied, from
upstream digital infrastructure to downstream digital and data services
International communications: voice, data
28
International gateway/landing station (e.g. submarine cable, terrestrial
cable, satellite) 27
Fixed communications wholesale services (e.g. fiber backbone
27
infrastructure, leased lines, metropolitan networks)
Fixed communications retail services: voice, data (Internet)
27
Markets/segments
Mobile communications retail services: voice, data (Internet), messages
24
Passive infrastructure services (e.g. ducts, towers) 20
Mobile communications wholesale services 19
Cloud and hosting services (e.g. website/email, datacenter collocation, 18
cloud storage)
(Mobile) payment services 16
Other data services (e.g. mobility analytics, cloud computing, IoT solutions) 15
Digital services on digital platforms (e.g. e-commerce, ride hailing, e- 13
commerce for farmers)
Other ICT services (e.g. videoconferencing, contact centers) 11
Other non-ICT services (e.g. real estate) 7
0 5 10 15 20 25 30
Number of SOEs
Source: World Bank Markets, Competition and Technology Unit, Database of SOEs in Digital Sectors across Africa.
Note: The SOEs studied and presented in this graph are typically active in more than one market segment (i.e., they are
vertically integrated to some degree along the value chain – discussed in more detail below). As such, the presence of an SOE
in one category is not necessarily exclusive of it being present in another category.
Figure 6. Countries have higher overall scores on Figure 7. Mobile services and devices are more
the GSMA Connectivity Index when SOEs face affordable in countries where SOEs face
competition in the markets in which they operate competition in the markets in which they
operate
70.00 70.00
GSMA Affordability Index Score
GSMA Index: Overall Score
60.00 60.00
50.00 50.00
40.00 40.00
30.00 30.00
20.00 20.00
0% 20% 40% 60% 80% 0% 20% 40% 60% 80%
Average proportion of market segments with SOE Average proportion of market segments with SOE
participation where the SOE is a sole operator participation where the SOE is a sole operator
Source: World Bank Markets, Competition and Technology Source: World Bank Markets, Competition and Technology
Unit, Database of SOEs in Digital Sectors across Africa, and Unit, Database of SOEs in Digital Sectors across Africa, and
GSMA Intelligence GSMA Connectivity Index 2019 GSMA Intelligence 2019
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
Vertical integration across the various market segments in the digital infrastructure and digital value
chain is relatively common amongst SOEs operating in Africa. Approximately 40 percent of the SOEs
studied for this paper (16 of 37) are vertically integrated,33 involved both upstream, in natural monopoly
segments such as the operation of backbone infrastructure, as well as downstream in more contestable
segments such as the provision of retail mobile services to consumers (Figure 8). For example, Kenya’s
Safaricom, Mauritius Telecom, MTN South Africa, Telkom South Africa, and Maroc Telecom participate in
all digital market segments studied for purposes of this paper, as well as other non-ICT services (e.g. real
estate).34 These SOEs exhibit minority state ownership, ranging between 25 and 39 percent. Overall, of
the 16 SOEs classified as vertically integrated, 2 are wholly state-owned, 3 are majority state-owned (50
percent or more), in 10 SOEs the government ownership ranges from 25 to 49 percent, and 1 has state
ownership below 25 percent.
Vertical integration can increase efficiencies but also increase the risk of anticompetitive behavior and
market foreclosure. Whenever operators have the incentive and the ability to discriminate in favor of
their vertically integrated subsidiaries through control of non-replicable assets, further regulatory
intervention may be necessary—to require a transparent separation or “unbundling” between the parts
of the incumbent controlling the bottleneck assets and the other divisions. However, in the absence of
adequate regulatory intervention, vertical integration can lead to suboptimal market outcomes such as
high wholesale prices and limited network development.35 Alternative approaches involve governments
taking on a coordinating role and opening the backbone market to private investment, enforcing open
access and cost-based pricing, and offering incentives to existing or new operators to invest in less
lucrative areas to complete the infrastructure backbone.36 Adding to the risks associated with vertical
integration, in almost 9 of every 10 countries surveyed, SOEs are the largest or the second-largest
company in the relevant market segment in which they are active (Figure 9) and, as noted above, 41
percent (15) are sole operators in at least one of the market segments in which they operate, with no
presence of private firms.
Figure 8. Share of SOEs that are vertically Figure 9. Percentage of SOEs that are either the
integrated across more than one segment largest or second largest company in the relevant
market segment
11%
41%
54%
89%
Non-Integrated Vertically Integrated
Yes No
Source: World Bank Markets, Competition and Technology Unit, Source: World Bank Markets, Competition and Technology Unit, Database
Database of SOEs in Digital Sectors across Africa. of SOEs in Digital Sectors across Africa.
Note: Market share is based on the number of subscribers according to
GSMA data as of Q4 2019.
33 An SOE is defined for purposes of this study as vertically integrated if it is participating in at least 40% of the market segments
analyzed, such that is operates simultaneously in sectors such as Infrastructure (international gateway, landing stations), fixed
communication retail (voice, data) services, fixed communications wholesale services (e.g., fiber backbone infrastructure, leased
lines, metropolitan networks), and more commercial segments such as mobile communications retail services.
34 See above at fn 33 for market segments studied for purposes of this paper.
35 World Bank (2018a).
36 World Bank (2021).
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
SOEs and competitive neutrality in digital infrastructure and digital
markets: policy considerations in Africa
5.1. Overview
State ownership in digital sectors is not problematic per se, but SOEs are often associated with a variety
of preferential, market-distorting policies that can compromise private sector viability and profitability.
Inefficient and poorly exercised state ownership can have significant negative effects on economies by
creating additional risks for public finances, risks to the financial sector through state-owned banks, and
risks to productivity and economic growth through spillovers from inefficient SOEs to private firms.37 The
presence of SOEs in the market can unintentionally lead to adverse effects and market distortions, which
can be broadly categorized into three groups: (1) effects of SOEs on market functioning and private sector
participation; (2) effects of SOE performance on development outcomes; and (3) effects of domestic SOEs
on global markets.38
Adverse effects on the private sector and market distortions are often a result of formal government
rules or implementation actions that may protect SOEs from entry and competition—a failure to
implement or uphold competitive neutrality in a given market. Where direct or indirect benefits are
provided to SOEs by the government and not offered to private firms, this creates an unlevel playing
field—skewing firm incentives and distorting competition (see also Annex 3).39 Benefits may include
subsidization, preferential tax treatment or exemptions, in-kind benefits, and concessionary financing and
guarantees. As a result, SOEs often operate within soft budget constraints, secure in the knowledge that
they will continue to receive government support regardless of their level of return on investment, losses
suffered, or low-quality outputs.40 This reduces incentives to increase efficiency, productivity, and quality
in the goods or services delivered, and reduces the potential for new private sector investments. 41 Soft
budget constraints also reduce the SOE incentives to reduce jobs, which can be politically controversial
(and indeed SOEs may be subject to significant political pressure to maintain or even increase
employment, particularly around elections), or pay off loans, thereby increasing the debt risks for
sovereigns. Moreover, although concentrated market structures may emerge naturally and efficiently,
especially in small markets or in sectors with large economies of scale such as telecommunications and
digital more generally, markets with fewer participants are even more vulnerable to anti-competitive
behavior such as collusion.
To understand the competition dynamics in the markets in which SOEs operate, regulatory frameworks
can be analyzed to determine whether they include important safeguards to minimize potential market
distortions that can result from SOE participation in markets. These safeguards can be categorized using
the World Bank’s Competitive Neutrality Gap Analysis, across two pillars—firm-level principles and cross-
cutting policy—each with four sub-components (Table 4).
37 Böwer (2017); Shapiro and Globerman (2012).
38 World Bank (2019a).
39 OECD, (2011).
40 Kornai, Maskin, and Roland (2003).
41 Kowalski et al. (2013).
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
Table 4. Competitive neutrality principles in digital markets
PRINCIPLE APPLICATION TO DIGITAL SECTORS
Firm-level principles
Streamlining the operational Where SOEs engage in both commercial and noncommercial activities there
form of government business should be a mandatory unbundling of such activities: this is the case of operators
entrusted with the provision of universal and public service obligations (USOs
and PSOs), such as the development of broadband infrastructure and access
across the country, in addition to commercial activities.
Identifying the costs of any Where an SOE combines the provision of commercial and non-commercial
given function activities (e.g., it provides fixed line retail communication services and operates
backbone infrastructure for the same), it should adopt cost allocation
mechanisms to ensure public funds that are granted to finance PSOs do not
finance commercial activities in the market.
Achieving commercial rates of SOEs should be required to achieve commercial rates of return in their
return commercial operations, such as the provision of digital mobile services,
particularly in markets where private actors also operate.
Accounting for Universal and Compensation to SOEs for the provision of public services, such as the
Public Service Obligations maintenance and operation of submarine cables or international landing
(PSOs) stations, should be market-based and transparent for purposes of
accountability.
Cross-cutting principles
Regulatory neutrality All firms, including SOEs, should receive equal treatment in the law. For
example, SOEs that deliver PSOs in the operation of fixed line
telecommunications networks should not be exempted from the obligations
contained in the competition law, or excluded from antitrust enforcement.
Tax neutrality42 Within the broader tax system for corporate commercial activities, SOEs should
not benefit from any exemptions or preferential treatment, e.g., reduced rates,
rights of deferral. For example, an over-the-top (OTT) service provider, which
provides similar audio, video, or other media via the internet primarily, should
not be subject to different taxation levels (de jure or de facto) as compared to
traditional mobile network operators (MNOs).
Debt neutrality SOEs should have access to credit on the same terms as private sector operators,
and should not receive public funds, for example, to invest in backbone
infrastructure or mobile services activities that compete with private operators
without a clear economic justification or policy objective.
Preferential treatment in The rules and processes that apply to public procurement should be transparent
procurement and non-discriminatory. For example, the allocation of spectrum rights should
not favor SOEs over private providers.
Source: Authors’ elaboration; adapted from OECD (2012).
Analyzing each of these issues to assess the conditions of competition for SOEs versus private actors in
the relevant market involves an in-depth analysis of applicable laws, regulations, and policies against a
42 For a more detailed discussion of taxation in the digital sectors see Background Paper 5: Taxes and parafiscal fees on digital
infrastructure services in Africa.
17
Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
benchmark of best practices. The following section provides a high-level assessment of the countries and
digital market segments in which the 37 SOEs surveyed operate in Africa.
5.2. Competitive neutrality in Africa’s digital sector
Important limitations were identified regarding the implementation of competitive neutrality in digital
sectors across Africa.
5.2.1 Streamlining the operational form of government business – separating commercial from non-
commercial activities of SOEs
In order to ensure the credibility of investment, international practice recommends structurally
separating commercial from non-commercial activities where feasible and efficient, particularly if the
SOE has significant market power . Such a separation ensures that the allocation of public funds does not
distort the level playing field by financing the provision of a commercial activity in the market. The
distinction between commercial and non-commercial activities is important because it may well be
appropriate for money to flow from a government to an SOE in return for the performance of a PSO, but
government funds flowing to an SOE to support commercial activities are likely to give SOEs undue
advantages over (potentially more efficient) private-sector firms performing the same commercial
activity.
Ideally, applicable legal frameworks should both (i) define commercial activities;43 and (ii) require
separation of commercial from non-commercial activities in SOE operations. Business separation can
encompass varying degrees, ranging from account unbundling to structural bundling. Also, ownership
rights should be separated from regulatory functions, to prevent situations of self-preferencing where an
SOE can block market entry or access to infrastructure or hinder expansion by its competitors. Separation
may ultimately facilitate the arrival of new competitors to the relevant market segment.
Figure 10. Share of countries that require SOE to
separate commercial from noncommercial functions
Yes No
11%
89%
43For example, the Trans-Pacific Partnership (TPP) defines commercial activities “as activities which an enterprise undertakes
with an orientation toward profit-making and which result in production of a good or supply of a service that will be sold to a
consumer in the relevant market in quantities and at prices determined by the ente rprise.” (TPP, Chapter 17.1) In the EU, any
activity consisting in offering goods and services on a market is an “economic activity”. (Case 118/85 Commission v Italy [19 87]
ECR 2599, paragraph 7)
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
Source: World Bank Markets, Competition and Technology Unit,
Database of SOEs in Digital Sectors across Africa.
Of the 37 SOEs analyzed in detail across 18 countries, 8 (approximately 20 percent) perform both
commercial and non-commercial functions. However, in almost 90 percent of the countries analyzed,
there are no requirements for the SOEs to separate commercial and non-commercial (i.e., universal and
public service obligations) functions (Figure 10). Morocco and Tunisia are the only two countries that
legally oblige SOEs to separate commercial from non-commercial activities in their financial accounting,
which otherwise fosters the identification of costs associated with universal and public service
obligations (USOs and PSOs), and monitoring of revenues (or losses) associated with other activities
(Box 1). If the legal framework fails to define commercial versus non-commercial activities and
subsequently also fails to impose an obligation on SOEs to separate such activities to some degree, this
can facilitate cross-subsidization, create a lack of transparency regarding financial flows, and potentially
compromise market-based decision-making by telecom operators, including SOEs.
Box 1. Morocco and Tunisia require SOEs to separate accounts, which promotes a level playing field
Morocco: The Décret n° 2-97-1025 du 27 chaoual 1418 (25 février 1998) relatif à l'interconnexion des
réseaux de télécommunications tel qu’il a été modifié et complété par le décret n°2 -05-770 du 6
joumada II 1426 (13 juillet 2005) requires SOEs operating in the telecommunications sector to maintain
separate accounts (account unbundling) for their activities in order to identify the following categories
of costs: (i) general network costs, i.e. the costs relating to the network elements used at both by the
operator for services intended for its own users and for interconnection services; (ii) costs specific to
interconnection services; (iii) costs specific to other services provided by the operator; (iii) all other
costs.
Tunisia: The Code des Télécommunications at Article 26bis (Ajouté par art. 2 de la loi n°2008-1 du 8
janvier 2008) requires that Operators of public telecommunications networks and access networks
keep separate accounts so as to distinguish between each network and each service, and to avoid any
cross-subsidization between their operations.
Source: World Bank Markets, Competition and Technology Unit, Database of SOEs in Digital Sectors across Africa.
5.2.2 Identifying the costs of any given function
Since commercial activities may be carried out by public entities, which often share assets and costs
with other parts of the government or public sector, it is important to develop cost-allocation
mechanisms that guarantee that the allocation of public funds is not distorting the level playing field by
financing the provision of a commercial activity in the market . The separation of commercial and non-
commercial activities is crucial to ensure that SOEs are adequately compensated for PSOs while not
receiving implicit subsidies for commercial activities, which could unlevel the playing field at the expense
of (potential) private competitors. Typically, the law should set out a methodology to keep separate
financial records of commercial and noncommercial activities and conduct oversight of SOEs through
audits/annual reporting to ensure implementation. In this regard: (i) compensation for PSOs must be
clearly defined; (ii) parameters for compensation must be established in advance in an objective and
transparent manner; (iii) compensation provided should not exceed costs of PSOs; and (iv) where the
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
undertaking with PSOs is not chosen according to a public procurement procedure, the level of
compensation needed must be determined based on an analysis of the costs of a typical, well run and
adequately equipped undertaking. 44
If a country does not require the formal separation of SOE operations and/or accounts between
commercial and non-commercial activities, it is generally not possible to require entities to identify the
costs of any given function. This is the case of most African countries surveyed, except for Morocco and
Tunisia. For example, in Morocco, Article 17 of the Décret n° 2-97-1025 requires telecommunications
operators to keep separate accounts for commercial and non-commercial activities, and the same
provision goes on to stipulate that the sector regulator sets the rules for separate accounting systems as
well as the costs that can be taken into account for the calculation of the tariffs of the various telecom
services, in particular those relating to interconnection.
5.2.3 Achieving commercial rates of return
SOEs operating in a commercial and competitive environment should be expected to earn rates of
return similar to comparable private businesses over a reasonable period of time, otherwise, private
actors can be undercut and crowded-out from the market. This may happen because the SOEs could
factor their low-profit margins into their pricing. SOE could also exclude competitors by pursuing
aggressive pricing policies financed by the low profit if not below-cost pricing. Furthermore, SOEs should
also pay an adequate rate of return on the assets they use for providing the relevant activities to avoid
benefiting from undue advantages.
The Internal Rate of Return (IRR) or the net present value are typical measures used to determine the
rate of return on investment.45 When an SOE is entrusted with PSOs, the rate of return on capital is based
on the IRR that the undertaking makes on its invested capital throughout the period it was entrusted to
perform certain PSOs. For PSOs rendered by the SOEs, the European Commission, for example, regards a
rate of return on capital that does not exceed the relevant swap rate plus a premium of 100 basis points
as reasonable (Box 1).46 On the other hand, the conformity of a public investment in digital infrastructure
(e.g., broadband roll-out) with market terms should be demonstrated either by means o;f a significant
participation of private investors or the existence of a sound business plan showing an adequate return
on investment. Where private investors take part in the project, it generally must be shown that they
44 See Case C-280/00, Altmark; Commission Decision (EU) 2016/2084 of 10 June 2016 on State aid SA.38132 (2015/C) (ex
2014/NN).
45 The Internal Rate of Return (IRR) is defined as the discount rate that zeroes out the net present value of flows of costs and
benefits of an investment, that is to say the discount rate of the equation below: NPV (S) = ∑ [St / (1+ IRRt)] = 0. The In ternal
Rate of Return is an indicator of the relative efficiency of an investment, and should be used with caution. The Net
Present Value of a project is the sum of the discounted net flows of a project. The Net Present Value (NPV) is a very concise
performance indicator of an investment project: it represents the present amount of the t benefits (i.e. benefits less costs) flow
generated by the investment expressed in one single value with the same unit of measurement used in the accounting tables.
NPV indicates whether the income from a given project exceeds the (opportunity) costs of capital. The project is considered as
an economically profitable investment when it generates a positive NPV. Investments producing lower income as the
(opportunity) costs of capital are not economically profitable. The (opportunity) costs of capital are reflected in the discount
rate. For a detailed explanation of both concepts, see the EU Commission: Guide to cost-benefit analysis of investment projects,
Structural Funds, Cohesion Fund and Instrument for Pre-Accession, 2008.
46 Commission decision State aid SA.38788(2015/N) –United Kingdom Compensation to Post Office Limited for costs incurred to
provide SGEIs 2015-2018, para. 110 and paragraph 25 of the SGEI Framework. For the details of the application of the net avoided
cost methodology see paras. 111-114.
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
would have to assume the commercial risk linked to the investment under the same terms and conditions
as the public investor.47
Box 2. The European approach to defining a commercial rate of return
The European Commission has examined the use of the IRR in the broadband field in a decision related
to a broadband venture in Amsterdam, in order to assess the conformity of a public investment with
market terms. According to the Commission, the conformity of private investment with market terms
has to be demonstrated thoroughly and comprehensively, either by means of a significant participation
of private investors or the existence of a sound business plan. In this context, the IRR ratio is typically
the most appropriate parameter for an analysis of the business plan, since it is used to make decisions
on long-term investments and to compare different investment projects.
However, given the novelty of the project, the dynamic nature of the broadband telecommunication
markets, and limited IRR data, the Commission decided to use the weighted average cost of capital
(WACC) of other companies in the same industry. WACC data can be a useful benchmark because a
project is considered worth undertaking if the IRR exceeds the WACC. The Commission also assessed
the alternative financial indicators used in the business plan, such as the positive cash flow generation
and the return on equity. Notwithstanding, it could not carry out a thorough benchmarking exercise for
these indicators due to the lack of publicly available data, and therefore had to assess them from the
point of view of the adequacy and internal consistence within the business plan.48
On the other hand, where an SOE provides PSOs, the Commission regards as “reasonable” a rate of
return on capital that does not exceed the relevant swap rate plus a premium of 100 basis points. 49
Source: Authors’ elaboration based on various sources.
Of the 37 SOEs surveyed across 18 countries, only one of the host countries, Tanzania, systematically
required SOEs in the telecommunications sector to achieve a commercial rate of return in their
operations. In Ghana and South Africa, 2 SOEs were ultimately expected to achieve a commercial rate of
return, not due to an overarching legal obligation but rather because the government held only a minority
stake (Box 3). When SOEs are not required to achieve a commercial rate of return, they operate within
soft budget constraints, which reduces the incentives to increase efficiency, productivity, and quality of
the services delivered, and can consequently lead to poor market outcomes (Box 4).
Box 3. SOEs in the digital infrastructure sector in Africa rarely are obliged to achieve a commercial
rate of return
Ghana: Vodafone Ghana, in which the Ghanaian government has a 30 percent stake, is not legally
obliged to achieve a commercial rate of return. However, since the government is only a minority
shareholder, the company will be subject to the commercial demands and expectations of its private
47 European Commission, Communication from the Commission – EU Guidelines for the application of State aid rules in relation
to the rapid deployment of broadband networks (2013/C 25/01), para. 17.
48 Commission Decision of 11 December 2007 in Case C 53/06 — The Netherlands, Citynet Amsterdam — Investment by the city
of Amsterdam in a fibre-to-the home (FttH) network (OJ L 247, 16.9.2008, p. 27).
49 See also Commission decision State aid SA.38788(2015/N) –United Kingdom Compensation to Post Office Limited for costs
incurred to provide SGEIs 2015-2018, para. 110 and paragraph 25 of the SGEI Framework. For the details of the application of the
net avoided cost methodology see paras. 111-114. It can be consulted online at
http://ec.europa.eu/competition/state_aid/cases/256622/256622_1651530_118_2.pdf
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
shareholders—as a result, the SOE may be more likely to strive towards efficiency-enhancing modes of
operation and greater productivity, to maximize its return.
South Africa: The South African government has a 25 percent stake in MTN South Africa, which is a
publicly traded company. As a result, and similar to the situation with Vodafone Ghana, it would be
incentivized to turn a profit to maintain (and potentially grow) its market share price.
Tanzania: According to Section 5(1) of the Tanzanian Telecommunications Corporation Limited (TTCL)
Act No. 12 of 2017, read together with Section 14(2)(d) of the Public Corporations Act, TTCL as an SOE
is required to “operate its business in accordance with sound commercial principles .”
Source: World Bank Markets, Competition and Technology Unit, Database of SOEs in Digital Sectors across Africa.
Box 4. Digital SOEs in Sierra Leone: soft budget constraints and poor market outcomes
Across the board in Sierra Leone, SOEs operate within soft budget constraints. There is no SOE or public
sector law that requires SOEs to achieve a commercial rate of return, they benefit from favorable
financial treatment in terms of deferred tax payments (even though they are subject to full tax liability)
and in the digital sector, they benefit from reduced annual fees for spectrum access. As domestic firms,
SOEs also receive preferential treatment over foreign bidders in public procurement. Furthermore, as
there is no regulatory framework to facilitate and structure infrastructure sharing, private investment
and access are not promoted with respect to the submarine and terrestrial fiber network.
Notwithstanding the government support and advantages provided to SOEs operating in the digital
infrastructure and digital communications sectors, Sierra Leone exhibits poor market outcomes in
terms of quality of infrastructure, coverage, and cost. This may be due at least in part to the absence
of competition upstream and, in particular, the absence of private firms in the submarine and terrestrial
fiber network. Sierra Leone ranks 143rd out of 170 economies worldwide regarding the quality of digital
infrastructure and network coverage is 50 percent (8 points below the regional average), placing Sierra
Leone 137th out of 170 economies on this metric. Mobile ownership is approximately 54 percent in-
country and high services costs cannot help: despite price reductions in recent years, the country ranks
129th of 170 countries on the mobile affordability index. Two SOEs, Sierra Leone Cable Limited and
Sierra Leone Telecommunications Company, are the sole operators in certain of their market segments:
they hold de facto monopolies over the submarine and terrestrial fiber network as well as fixed-
communication wholesale (fiber backbone infrastructure, leased lines, metropolitan networks) and
retail (voice, data) services, respectively. The Sierra Leone Telecommunications Company does operate
and compete with private firms in the provision of retail mobile services (voice, data), however, but
holds only 3 percent of the market. Given this market structure, and relatively high market shares
upstream in fixed infrastructure combined with low market shares downstream, it is likely the lack of
competition upstream that is raising costs for mobile services providers, which pass this on to
consumers through higher prices.
Source: World Bank Markets, Competition and Technology Unit, Database of SOEs in Digital Sectors across Africa.
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
5.2.4 Accounting for Universal and Public Service Obligations (USOs and PSOs)
Compensation is often given to public entities and SOEs for the provision of public services (e.g.
ambulance services, universal postal service, urban transportation etc.). However, if the public entity or
SOE also operates in the marketplace there is a risk that the compensation be used to cross-subsidize the
commercial activities of the provider. For example, an SOE involved in the maintenance and operation of
fixed infrastructure such as backbone or submarine cables, a public mission for which is compensated by
the government, could use part of the compensation received for an activity falling outside the scope of
the PSO if they are in fact overcompensated for the provision of that PSO, e.g. to reduce its prices of fixed
or mobile network services to end users, a commercial activity that is also carried out by the SOE.
Conversely, if the compensation is not sufficient to cover the costs of the provision of the PSO, the SOE
may be put at a disadvantage vis-à-vis its competitors in the marketplace.
Regulators should not attach specific PSOs to services that are already provided or can be provided
satisfactorily by undertakings operating under normal market conditions such as price, objective quality
characteristics, continuity and access to the service, and consistent with the public interest, as defined
by the State. Considering the broadband sector as an example, the European Commission considers that
in geographic areas where private investors have already invested in a broadband network infrastructure
(or are further expanding the network) and are already providing competitive broadband services with
adequate broadband coverage, setting up a parallel competitive and publicly funded broadband
infrastructure cannot be considered as justifying a PSO. However, where it can be demonstrated that
private investors are not in a position to provide adequate broadband coverage to all citizens or users in
the near future, thus leaving a significant part of the population unconnected, a PSO may be necessary. 50
If a country does not require the formal separation of SOE operations and/or accounts between
commercial and non-commercial activities (Section 3.2.1) nor the identification of the costs of a given
function (Section 3.2.2), it is generally not possible to require entities to account for PSOs. As noted
above, in almost 90 percent of the countries analyzed, there are no requirements for the SOEs to separate
commercial and non-commercial functions. Morocco and Tunisia are the only two countries that legally
oblige SOEs to separate commercial from non-commercial activities in their financial accounting (see
above in Box 1), which allows SOEs to then identify the respective costs of each function and account for
PSOs discretely. Notably, Morocco and Tunisia scored significantly higher than the average GSMA
Connectivity Index score for the countries studied (45.21), as well as the African region more broadly
(39.03), with 59.89 and 60.03 respectively.
5.2.5 Regulatory neutrality
To the extent possible, public and private businesses should conduct their activities under the same
regulatory conditions in order to avoid SOEs receiving advantages that distort competition in the
marketplace. Where this is not feasible, appropriate adjustments should be made to neutralize the
remaining advantages or disadvantages. The word “regulatory” is interpreted broadly as referring to both
the legal and regulatory frameworks in which businesses operate (e.g., the general business environment
dealing with business laws, licensing and regulations, bankruptcy, antitrust) as well as the enforcement of
product market regulations in their relevant sector. At a general level, regulation should be non-
50European Commission, Communication from the Commission – EU Guidelines for the application of State aid rules in relation
to the rapid deployment of broadband networks (2013/C 25/01), para. 20.
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
discriminatory – i.e., it should apply equally to companies involved in the management of digital
infrastructure, fixed and mobile communications services providers, and downstream data services
providers, with or without state ownership, and to different legal classes of businesses, with no
differences in coverage, applicability, transparency or implementation.
Regulatory neutrality is paramount to ensure a level playing field in digital markets, particularly where
there is vertical integration in the market or ownership of essential infrastructure, and a higher risk of
self-preferencing. This risk is especially acute in Africa where there is a lack of sufficient public funding to
ensure full network coverage and accessibility. And there is a growing risk of an inadequate enforcement
of sector-specific regulation vis-à-vis digital platforms that have invested in upstream digital
infrastructure. For instance, Facebook has been actively investing in network infrastructure, at various
times, in the African continent, especially in the following (e.g., fiber, edge network infrastructure
including points of presence (PoP), caches in telecom operators’ networks) and entering into partnerships
with telecom operators and ISPs to improve network coverage and accessibility. 51 If sector regulation (e.g.
net neutrality and SMP) rules are not effectively enforced, there is a greater risk of big tech firms limiting
access to essential infrastructure and/or self-preferencing their digital platforms with potentially
anticompetitive effects. For example, Facebook’s investments in network infrastructure in Africa (e.g., the
“2Africa” submarine cable) have been cited as a risk to net neutrality if not combined with appropriate
regulatory protections.52
To ensure a level playing field between SOEs and private firms with respect to the regulatory
framework, it is also important that the State requires SOEs to meet reasonable requests for access to
their physical infrastructure. Indeed, international best practice recommends that regulators impose an
obligation for access to infrastructure built on State property (i.e., rights of way). For instance, SOEs in
Angola, Benin, Comoros, Gabon, Morocco, South Africa, and Tunisia manage essential facilities
infrastructure, even though they also operate in the retail segments of the value chain. This creates risks
of self-preferencing if governments do not also have in place ex-ante regulation mandating infrastructure
sharing. In addition, non-strategic markets should generally be open to potential private sector entrants
and investment, even if the segment exhibits natural monopoly characteristics. Another important aspect
of regulatory neutrality requires that government agencies or SOEs charged with oversight and regulation
of SOEs or sectors in which SOEs are active should be separate and should not be involved in the day-to-
day management of SOEs’ commercial activities.53
Box 5. Digital SOEs in Angola: state monopolies, weak network coverage and low affordability
Angola exhibits poor performance in its telecommunications sector overall. It ranks 130th out of 170
economies in the overall GSMA Connectivity Index. Network coverage is approximately 57 percent,
which is just below the Continental average, and places it 128th out of 170 economies globally.
Affordability is marginally better, as Angola ranks 96th on the GSMA affordability ranking (as compared
to 129th for Sierra Leone, see above in Box 4), but mobile penetration is lower at 46 percent. Angola is
51 Analysis Mason (2020).
52 See here for discussion: https://www.theafricareport.com/34906/how-facebook-spun-its-web-across-african-internet/ and
https://www.theguardian.com/world/2016/aug/01/facebook-free-basics-internet-africa-mark-zuckerberg.
53 OECD (2012), p. 65.
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
identified as having highly concentrated markets, with a Telecom HHI score of >6100 (one of the 10
least competitive in the Africa region).
Market structure and regulatory protections for state-owned incumbents may at least in part be to
blame for these conditions. Three of the SOEs studied for this paper are the largest market players with
respect to ownership of backbone infrastructure, and the provision of fixed and mobile communication
services. Angola Telecom, which provides wholesale and retail fixed communications services is the
sole operator with respect to wholesale but competes with private sector operators with respect to
retail mobile and fixed communications services. Indeed, by law, the ownership and operation of digital
infrastructure in Angola is reserved to the State, and although activities that are not part of the basic
network can be provided by companies with no government participation, it is only possible through
concession contracts. Additional institutional structures and preferential treatment may also be a
problem, however, compounding the perceived risks and low returns associated with private
investment. Various SOEs sit as members of the Technical Council of the telecommunications sector
regulator, which suggests prices and fees for the sector and consequently creates a conflict of interest
for SOEs in terms of the commercial and non-commercial activities of SOEs in the sector. Furthermore,
in downstream segments where Angola Telecom competes with private operators in the provision of
retail mobile and fixed line services, Angola Telecom has preferential access to finance through capital
injections and other operating subsidies from the government, priority loans through state-owned
banks, and government guarantees. More generally, SOEs are exempt from bankruptcy law and are not
required to achieve a commercial rate of return.
Source: World Bank Markets, Competition and Technology Unit, Database of SOEs in Digital Sectors across Africa.
Box 6. SOEs’ de facto monopolies regarding the ownership of digital infrastructure
Ethiopia: Until recently, policy direction with regards to passive infrastructure established that private
developers are not allowed to own or lease towers. As a result, private operators have had to rely on
passive infrastructure owned by the state-owned operator, Ethio Telecom. This placed private
operators at a competitive disadvantage in terms of cost of accessing infrastructure vis-à-vis SOEs, and
increased the risk of anticompetitive behavior by the latter since it can limit entry and/or expansion by
competitors in downstream markets. In mid-2021 the Ethiopian government initiated the sale of a 40
percent stake in the national network operator, Ethio Telecom, to an international operator, as well as
a 5% stake to local investors.54 Through 2021 and into 2022, the Government also engaged in a tender
to select a third licensed operator, to operate alongside Ethio Telecom and a Safaricom-led consortium,
which received a license effective July 2021. The Safaricom-led consortium (the consortium is called
the “Global Partnership for Ethiopia”, comprising Safaricom, Vodacom, Vodafone, Sumitomo
Corporation, and CDC Group) can now provide any telecommunications service including voice, text,
data, and video using any technology whether fixed or wireless anywhere within Ethiopia.
Source: World Bank Markets, Competition and Technology Unit, Database of SOEs in Digital Sectors across Africa.
54 For more information, see: https://www.reuters.com/business/media-telecom/ethiopia-launches-tender-process-sell-40-
stake-ethio-telecom-2021-06-14/ and https://www.businesswire.com/news/home/20211207005853/en/Ethiopia-Telecoms-
Mobile-and-Broadband-Markets-Statistics-and-Analyses-Report-2021---ResearchAndMarkets.com.
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
5.2.6 Tax neutrality
To maintain a level playing field, public and private business activities should be treated equally under
tax law. This means, first and foremost, that the State should not award tax derogations to private firms
or SOEs that may amount to a selective advantage in relation to firms which, considering the objectives
intrinsic to the system, are in a comparable factual and legal situation. In principle, SOEs should be treated
as any other undertaking for the purposes of corporate and other business-related taxes to avoid market
distortions.55 This comparability analysis is made in relation to the tax reference system and does not
require a relevant market definition or the determination of whether there is an actual advantage. 56 The
concept of a tax reference system57 is of key importance under a competitive neutrality analysis since it
provides a basis for assessing whether a given tax derogation is selective or not, irrespective of ownership.
If a derogation cannot be justified by the logic of the reference system, then it is selective in nature. A
detailed analysis of tax treatment across market players is required to determine the actual preferential
treatment of the market players.
An example of lack of tax neutrality can be found when States impose higher levels of taxation upon
OTT service providers that use the internet to deliver streaming audio or video services, or other media,
as compared to traditional MNOs that may be in the business of delivering similar services. Some
examples include: the Zambian government's announcement of a flat daily tax of 30 ngwees (US $0.03)
on IP-based voice calls in August 2018; Uganda’s social media tax of 200 Ugandan shillings ($0.05) for
using platforms like WhatsApp, Viber, Twitter, and Skype; Morocco’s tax on all of the P2P voice
applications.58 Radio spectrum is another area where governments may seek to impose discriminatory
taxation measures with SOEs being awarded radio spectrum pursuant to bilateral negotiations instead of
auctions like private operators (e.g. direct negotiation between the Government of Senegal and Sonatel
to assign a 17-year 4G license (1.5GHz and 800Mhz) for CFA 32bn (US$XXm)). By the same token, imposing
taxes on incoming international calls (e.g. Ghana, Guinea, Liberia, Niger, Tanzania) limits call volume and
connectivity within a country and may contribute to strengthening the position of incumbent firms. 59
Across all 37 SOEs in 18 countries, some 84 percent of the SOEs surveyed (in 72 percent of countries
surveyed) are subject to full tax liability in their home countries (i.e., subject to the same rate as private
sector actors in the same market segment). Only 11 percent of SOEs are granted preferential treatment
with respect to tax credits or treatment when tax arrears exist, in Angola, Sierra Leone, and Tanzania. Put
differently, 16 percent of the countries analyzed allow SOEs preferential access to tax credits or grant
them preferential treatment when in tax arrears. As a consequence of preferential tax treatment, SOEs
receive an economic benefit that they could not have obtained under normal market conditions. This gives
SOEs a cost advantage over their private competitors and, in certain circumstances, contributes to
strengthening the market position of SOE incumbents to the detriment of consumers (e.g. special taxes
for OTTs and incoming international calls).
55 The risk of market distortion is exacerbated when public businesses are not incorporated because the possible discrimination
vis-à-vis private undertakings is more difficult to identify.
56 For the assessment of an actual advantage, firm-level data to allow determining the effective tax treatment is required, but it
was not available during the writing of the report.
57 The tax reference system provides a clear set of rules that can objectively determine the applicability of a derogation.
58 World Bank, Regulatory Watch Initiative (RWI) Phase 2. For more information, see: https://blogs.worldbank.org/digital-
development/promoting-digital-development-through-best-practice-and-data-driven-regulation.
59 Ibid.
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
5.2.7 Debt neutrality and outright subsidies
SOEs often enjoy preferential access to finance through state-owned banks, government guarantees,
or outright subsidies that are not also available to private operators on the same terms . Financial
benefits are a special risk when SOEs are vertically integrated across value chains, with downstream
service providers potentially able to access networks at reduced rates or even free of charge. Such benefits
that are not also available to private actors give SOEs a competitive advantage and allow them to price
more aggressively and potentially undercut private competitors, distorting competition dynamics and
discouraging participation or even entry by private actors. In addition to such market effects, SOE
borrowing may lack transparency for central government agencies such as the Ministry of Finance,
particularly in lower capacity contexts where SOEs may not be subject to sufficient oversight—this
increases the financial exposure of sovereigns if debts are ultimately guaranteed by the state, with
potentially serious implications for sovereigns’ fiscal sustainability and risk ratings.
Subsidies and unsustainable borrowing can also affect market dynamics when they support digital
infrastructure projects in the absence of a market failure. For instance, in situations where there is
already one broadband network operator, subsidies for the construction of an alternative network
could distort market dynamics unless it can be clearly demonstrated that a market failure persists. For
example, the European Commission declared that funding granted for the development of additional
broadband infrastructure in Appingedam in the Netherlands was incompatible with the EC Treaty because
private firms had adequate incentives to invest in broadband in that area (a private operator was already
present) and that the best approach was to rely on market forces. The Commission concluded that there
was no market failure in the broadband market in Appingedam which would otherwise justify financial
state support.60 Other subsidies include the assignment of a spectrum holding for free or below market
price or through subsidies aimed at network deployment in non-commercial areas (e.g. rural areas) that
would not be attractive for private firms.
Of the SOEs surveyed, it was reported that 19 percent of them benefit, either as a result of express legal
permissions or in practice, from preferential access to finance from the government, such as through
reduced interest rates, government-backed loans, debt guarantees, or capital injections (Figure 11). At
the country level, this amounts to 39 percent of the countries studied offering SOEs preferential access to
finance from the government (Figure 12, Box 7). At the same time, it is important to note that government
ministries and agencies also often have large unpaid debts to SOEs, which could in some cases account,
at least in part, for direct on-lending to SOEs to help cover the associated costs.
60Commission Decision of 19 July 2006 on the measure No C 35/2005 (ex N 59/2005, which the Netherlands are planning to
implement concerning a broadband infrastructure in Appingedam (notified under document number C(2006) 3226) (Text with
EEA relevance) (2007/175/EC).
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
Figure 11. Share of SOEs receiving preferential Figure 12. Share of countries granting SOEs
access to finance from the government preferential access to finance
19% 22%
27%
39%
39%
54%
Yes No Unclear Yes No Unclear
Source: World Bank Markets, Competition and Technology Unit, Database of SOEs in Digital Sectors across Africa
Box 7. Countries where SOEs benefit from preferential access to capital from the government
Angola: Angola Telecom, which is wholly state-owned, receives operating subsidies and capital
injections from the government, as well as priority loans through state-owned banks, and government-
backed loans.
Ghana: The government can provide reduced interest rates for SOEs and according to the Public
Corporations Act, the president can waive payment of interests.
Liberia: Sources indicate that, in practice, the government frequently covers Liberia Telecom’s
liabilities.
Mauritius: The National Computer Board, which engages in various downstream data services including
mobility analytics, cloud computing, digital platform services and is wholly state-owned, is legally
entitled to receive financial contributions from the consolidated funds of the Government.
Mozambique: Moçambique Telecom, which is 90 percent state-owned and active in all upstream
aspects of digital infrastructure ownership and management, including international landing stations
and communications, and passive infrastructure services, as well as downstream aspects including
mobile and fixed retail services, receives preferential access to government-backed loans as a form of
financing.
South Africa: Broadband Infraco, another wholly-owned SOE that is engaged in the ownership and
management of fixed communications infrastructure, international gateways, and cloud and hosting
services, has preferential access to government-backed loans, and receives capital injections and grants
directly from the government. In addition, the governing law provides that Broadband Infraco may
borrow money, issue a guarantee, indemnity or security, or enter into any transaction necessary in
order to achieve its objectives.
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
Tanzania: The Tanzania Telecommunications Corporation, also wholly state-owned, and active in fixed
and mobile communications retail services, international landing infrastructure and communications
services, passive infrastructure services (ducts, towers), and mobile payment services, has access to
government-backed loans and reduced interest rates through the operation of various provisions of
the Tanzania Telecommunications Corporation Act, 2017.
Source: World Bank Markets, Competition and Technology Unit, Database of SOEs in Digital Sectors across Africa
5.2.8 Preferential treatment in public procurement
In order to ensure a level playing field and also to facilitate the entry of competitors in the public
contract market, procurement policies and procedures should be transparent, competitive, and non-
discriminatory. This concerns particularly the access of SOEs to public contracts and their treatment
during public procurement. SOEs should in principle be allowed to participate in bids on equal footing
with private enterprises but not enjoy any preferential treatment.
In the digital infrastructure context, preferential treatment in procurement may occur when
governments fail to ensure a transparent, objective, and non-discriminatory assignment of radio
spectrum. SOEs and private firms should bid on an equal footing for spectrum, meaning Governments
should avoid engaging in bilateral negotiations with SOEs that may result in a below-market price for
spectrum and in a competitive time advantage in relation to private players - e.g. direct negotiation
between the Government of Senegal and Sonatel to assign a 17-year 4G license (1.5GHz and 800Mhz).
The risk of a discriminatory assignment is especially high whenever spectrum management is not
entrusted to an independent authority that can prevent the State from favoring an SOE through the
preferential award of spectrum rights.
Asymmetric spectrum holdings can play a role in hindering the deployment of competitive mobile
networks by smaller operators. Namely, spectrum asymmetry may give larger operators an unmatchable
advantage over competitors that are unable to pool together the necessary spectrum holdings within the
same time frame. The risk of a discriminatory assignment is especially high whenever spectrum
management is not entrusted to an independent authority that can prevent the State from favoring an
SOE through the preferential award of spectrum rights. Transparency in public procurement is also
paramount whenever public authorities select a third-party operator to deploy and operate subsidized
digital infrastructure.
In addition, instruments such as public-private partnerships (PPPs) should be employed in a way that
does not distort the level playing field, in particular by preventing the granting of undue advantages to
the private or the public entity involved in the PPPs. This ensures transparency for all investors wishing
to bid for the implementation and/or management of the subsidized project. A competitive tender is the
best method to reduce budgetary costs, minimize the potential State aid involved, and reduce bias in the
selection of the private entity.
Across Africa, none of the countries studied maintain de jure asymmetric, preferential conditions with
respect to procurement processes for SOEs. Only Sierra Leone maintains a de jure preference in the law
in favor of domestic entities generally, which would benefit both domestic SOEs and private entities over
foreign bidders. Indeed, SOEs may in fact be subject to stringent rules in their own procurement. For
example, in Kenya wholly owned SOEs are regarded as public bodies and subject therefore to the
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
application of the Public Procurement and Asset Disposal Act (2015) (PPAD), which sets more stringent
conditions on procurement by public bodies as compared to private procurement processes.
Conclusion
In examining the prevalence of SOEs and adherence to competitive neutrality across a sample of African
countries digital infrastructure and downstream digital markets sectors , this paper reveals not only that
SOEs play a significant role but that they benefit from various protections that serve to inhibit competition
with, and entry by, private sector actors. As mentioned, prevalence is not a problem per se for competition
and dynamic markets, but as this paper explains, they frequently benefit from preferential treatment by
the government – through regulatory privileges and cheaper access to finance, for example – that distorts
the functioning of the markets and has significant implications for the viability and profitability of private
companies. This is a phenomenon that exists across countries and regions, and the African countries
studied for the purposes of this paper are no exception in this regard.
To the extent African governments wish to improve market outcomes with respect to downstream
digital services, increasing competition has been demonstrated to make a positive difference.
Governments would be advised to review the policy and regulatory environments surrounding the
operation of their SOEs and assess whether a level playing field exists for actual or potential private actors
as compared to SOEs—to better understand SOE incentives. Through appropriate, related reforms, the
inclusion of the private sector in infrastructure operations and service provision through management
contracts or public-private partnerships, and, in some cases, SOE restructuring and/or divestiture
initiatives, Governments can reshape those incentives and promote more efficient operations, ultimately
to deliver better quality, affordable communications, and data services to consumers in their markets.
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
Annex 1: Questionnaire
Questionnaire - Digital Sector State-linked enterprises
A1 Name of SLE/SOE
A2 Country of operation
A3 Under which legal form is the SOE/SLE set up?
a. Corporatized SOE incorporated under the companies law
b. Statutory corporation established by an act of parliament/statute
c. Non-corporatized SOE set up as a parastatal or government department
d. Corporatized company under the company’s law
e. Other (please specify)
Does the SOE/SLE operate under any or all the following legal frameworks? (multiple
A4
response)
a. Companies law
b. General public enterprise law or SOE law
c. Other public-sector laws (e.g., public sector employment rules, investment and budgeting regulations,
procurement laws, public financial management laws, public audit requirements)
d. Capital Markets Law or Listing Rules (for listed SOEs)
A5 Main industry/sector of operation of the SOE
Economic activity defined following ISIC rev.3 classification at least 4-digits of operation of the SOE:
https://unstats.un.org/unsd/classifications/Family/Detail/2
A6 Services offered by the SOE/SLE (multiple response)
a. Mobile communications retail services: voice, data (Internet), messages
b. Mobile communications wholesale services
c. Fixed communications retail services: voice, data (Internet)
d. Fixed communications wholesale services (e.g. fiber backbone infrastructure, leased lines, metropolitan
networks)
e. International communications: voice, data
f. International gateway/landing station (e.g. submarine cable, terrestrial cable, satellite)
g. Passive infrastructure services (e.g. ducts, towers)
h. (Mobile) payment services
i. Cloud and hosting services (e.g. website/email, datacenter collocation, cloud storage)
j. Other data services (e.g. mobility analytics, cloud computing, IoT solutions)
k. Digital services on digital platforms (e.g. e-commerce, ride hailing, e-commerce for farmers)
l. Other ICT services (e.g. videoconferencing, contact centers)
m. Other non-ICT services (e.g. real estate)
A7 % of shares directly owned by the state
% of shares indirectly owned by the state (for example, through other SOEs or holding
A8
companies)
Please provide annual financial statements for the last 3 years. If not available, please
B1
provide information on (and corresponding fiscal year):
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
Total annual turnover
Net profit or loss
EBITDA
Total assets, fixed assets, non-current assets, current assets
Total liabilities, short-term liabilities, long-term liabilities
Equity
Market capitalization if SOE/SLE is listed
B2 Number of employees for the last 3 years
Do the founding law/articles of association/performance contract and/or SOE strategy set
C1
the following mandates and objectives? (multiple response)
a. Commercial objectives
b. Social or non-commercial objectives
c. Regulatory functions
d. No clear objectives
C2 What ministry, government agency or institution formally owns the SOE/SLE?
C3 What ministry, government agency or institution executes the ownership rights
a. Line ministry
b. Treasury/Ministry of Finance
c. Specialized agency at arm’s length from government (not subject to direct ministerial intervention other than for
general guidelines and performance criteria), for example a sovereign wealth fund, holding company
d. Other type of specialized agency
e. Other (please explain)
Does the State or government agency monitor SOE performance through any of the
C4
following? (multiple response)
a. Performance contract, agreement or MOU
b. Key performance indicators approved by the board
c. Key performance indicators approved by the State/agency
d. Annual performance reviews of employees
e. No performance indicators
What formal corporate governance (CG) documents does the company have (in addition to
its Articles of Association) that address overall CG policies and practices of the company,
C5 and which cover, at a minimum (i) the rights and treatment of shareholders, (ii) the role of
the board of directors, (iii) transparency/disclosure, and/or (iv) business ethics? (multiple
response)
a. CG Code
b. Code of Ethics/Conduct
c. Shareholder Agreement (for mixed ownership SOE)
d. Other (please specify)
C6 Key performance indicators (KPIs), if any, are reported upon at what frequency?
a. Monthly
b. Quarterly
c. Annually
d. Other (please specify)
e. Not available information
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C7 Who does the Code of Ethics/Code of Conduct apply to? (multiple response)
a. Board members
b. Senior Management
c. All employees
d. Employees of all companies in the group
e. Suppliers, contractors and other partners
C8 Does the SOE adhere, mandatorily or not, to a national corporate governance code?
a. Yes, a general corporate governance code
b. Yes, an SOE specific code
c. No
d. Not available information
D1 Is there a formal and transparent process to appoint/nominate board members?
a. Yes
b. No
c. Not available information
Is the government represented on the board through any of the following? Please specify
D2
the number of board members in each category
a. Ministers
b. High level government officials (e.g. directors, head of agencies)
c. Other civil Servants
d. Independent representatives (e.g. academia, civil society, private sector)
e. Politically affiliated individuals
f. Other (please specify)
D3 Are the Chairman of the Board and CEO positions held by different individuals?
a. Yes
b. No
Can the SOE board members of the Board of Directors be removed before the completion of
D4
their terms at the sole discretion of the appointing authority?
a. Yes
b. No
D5 Are members of the Board of Directors required to declare any conflicts of interest?
a. Yes
b. No
Does the legal and the regulatory framework assign the following functions as an explicit
D6 responsibility of the Board of Directors without reference to any higher authority? (multiple
response)
a. Define corporate strategy (Setting strategy and vision of the SOE)
b. Select/appoint/overseeing/firing of CEO
c. Hiring/firing of other members of senior management
d. Oversight of internal controls
e. Oversight of external audit
f. Oversight of risk management
g. Approve and implement the strategy and business plan
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
h. Preparation of financial statements
i. Approval of major capital expenditures and large value transactions
j. Approving human resources policy
k. Approving financial statements
l. Managing operations of the SOE
m. Oversight of internal audit
n. Oversight of Related Party Transactions
o. Oversight of environment and social issues
p. Approve and oversee decisions to raise capital (e.g. debt, equity)
q. Decide and implement tariff adjustments
r. Other (please specify)
Are there minimum qualifications for SOE board members (by law, regulation, official
D7
guidance, or recommended practice)?
a. Yes
b. No
D8 Does the SOE indemnify its board members?
a. Yes
b. No
Is there a requirement to establish board-level committees (audit, compensation and
D9
appointment, risk, investment, etc.)?
a. Yes
b. No
D10 Is there an audit committee for the board?
a. Yes
b. No
E1 Is the SOE/SLE externally audited? (accounting practices, financial statements)
a. Yes
b. No
E2 By whom is the SOE/SLE externally audited?
a. State Auditor
b. Private audit firm
For SOEs with social or non-commercial objectives, are the cost of achieving those objectives
E3
measured and is the SOE compensated accordingly? (multiple response)
a. Social objectives clearly defined
b. Cost of achieving social objectives quantified
c. SOE fully compensated for cost of social objectives
d. SOE partially compensated for cost of social objectives
e. SOE not compensated for cost of social objectives
f. SOE cross-subsidizes to compensate for cost of social objectives
What type of shareholding does the State (national of subnational government) hold in the
F1
SOE/SLE?
a. The State has a majority stake (50% or more)
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b. The State holds the largest single share of equity
c. The State does not have a controlling interest and the stake is below 50%, but is a significant shareholder capable
of influencing the SOE/SLE by other means (e.g. golden shares, board nomination, capital decisions, etc.)
d. The State is not a significant shareholder capable of influencing the SOE/SLE
F2 Does the company have regulations in place to protect the rights of minority shareholders?
a. Yes
b. No
What mechanisms of shareholder rights protection does the company have? (multiple
F3
response)
a. The right to inspect the company's accounts
b. The right to request special audit
c. The right to call Extraordinary General Meeting
d. The right to bring a lawsuit against the company (derivative suits)
e. Other (please specify)
G1 Do antibribery laws for public officials apply to SOEs?
a. Yes
b. No
c. Not available information
Is financial support by the state to the SOE disclosed in a consistent and transparent
G2
manner?
a. Yes, in most cases
b. Yes, for certain type of support
c. No
d. Not available information
G3 Does access to information law apply to SOEs?
a. Yes
b. No
c. Not available information
H1 What is the SOEs analyzed? (Name of the company / (optional) state-participation)
H2 What are the market/segments in which the SOE/SLE participate? (multiple response)
a. Mobile communications retail services: voice, data (Internet), messages
b. Mobile communications wholesale services
c. Fixed communications retail services: voice, data (Internet)
d. Fixed communications wholesale services (e.g. fiber backbone infrastructure, leased lines, metropolitan
networks)
e. International communications: voice, data
f. International gateway/landing station (e.g. submarine cable, terrestrial cable, satellite)
g. Passive infrastructure services (e.g. ducts, towers)
h. (Mobile) payment services
i. Cloud and hosting services (e.g. website/email, datacenter collocation, cloud storage)
j. Other data services (e.g. mobility analytics, cloud computing, IoT solutions)
k. Digital services on digital platforms (e.g. e-commerce, ride hailing, e-commerce for farmers)
l. Other ICT services (e.g. videoconferencing, contact centers)
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m. Other non-ICT services (e.g. real estate)
Are there markets/segments where the SOE/SLE is the sole operator? (Please refer to
H3
question H2 to validate for each relevant segment indicated before)
a. Yes, in which markets/segments (please specify service/product and geographic area)
b. No
How many private companies operate vis-à-vis the SOEs in each relevant market segment?
H4 (Please refer to question H2 for each relevant segment indicated before) Indicate company
name/commercial name, market segment, and market share (%)
e.g. Total private firms: n
Firm 1 (Name) -> Market share (30% measured by number of subscribers)
Firm 2 (Name) -> Market share (20% measured by number of subscribers)
...
Firm n (Name) -> Market share (10% measured by number of subscribers)
What is the market share of the SOE/SLEs for each relevant market they serve? (Please refer
H5 to question H2 for each relevant segment indicated before) Indicate company
name/commercial name, market segment, and market share (%)
e.g. Total relevant markets: n
Market 1 (Name) -> Market share (50% measured by number of subscribers)
Market 2 (Name) -> Market share (70% measured by number of subscribers)
...
Market n (Name) -> Market share (10% measured by number of subscribers)
Is the SOE among the top 2 largest companies in any of the market/segment(s) it operates?
H6
(Please refer to question H2 for each relevant segment indicated before)
a. Yes, please indicate the specific market of reference
b. No
c. Not available information
For each market/segment identified previously, has the share of the SOE/SLE(s) increased,
H7 decreased or been stable over the last 3 years? Please indicate the specific market of
reference
a. Increased (10 percentage points or more)
b. Decreased (10 percentage points of more)
c. Stable (Between -10/+10 percentage points)
d. Not available information
H8 Has the SOE/SLE recently entered (in the last 2 years) or is planning to enter new markets?
a. Yes, it has started operations - Please indicate year and market (service/product and geographic area)
b. Yes, it has received a license/authorization - Please indicate year and market (service/product and geographic
area)
c. Yes, it has applied for a license/authorization or announced publicly intentions to enter a new market – please
indicate year/month of the announcement
d. No
e. Not available information
Over the last 3 years, has a new company entered to compete in the main markets where
H9
the SOE/SLE operates?
a. Yes, it has started operations - Please indicate year and market (service/product and geographic area)
b. Yes, it has received a license/authorization - Please indicate year and market (service/product and geographic
area)
c. Yes, it has applied for a license/authorization or announced publicly intentions to enter a new market – please
indicate year/month of the announcement
d. No
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
e. Not available information
Over the last 3 years, has any private competitor of the SOE/SLE exited one of the main
H10
markets where the SOE operates?
a. Yes, exit of an operating firm has happened. Please indicate which company and which market
b. No, but license has been revoked or license revocation process has started
c. No
d. Not available information – please provide complementary information on any other cases of license withdrawal
or previous exit/history of loss-making operation
Has the SOE entered into partnerships, joint ventures or PPPs with private firms to expand
H11
infrastructure or enter into new markets?
a. Yes. With which company and for which purpose (e.g. provision of mobile payments, provision of cloud
computing services, expansion into rural areas)?
b. No
Does the SOE act as the sectoral regulator or intervene in regulatory decisions in the market
I1 for key variables (e.g. prices, licenses)? (Please select all that apply and refer to the legal
framework - law, decree, etc.- that allowed the identification)
a. Yes, it has regulatory functions
b. Yes, it provides opinion in process to grant licenses/authorizations, determine prices/charges, allocate/assign
spectrum, among others. Please indicate other regulatory areas
c. Yes, it belongs to advisory or technical committee to the regulator or ministry
d. Yes, it is represented at the board of the regulator and/or participates in the process of appointing the head of
the regulator
e. Yes, through other means. Please indicate in which policy areas and how
f. No
I2 Does the SOE perform simultaneously in commercial and non-commercial activities?
Definitions retrieved from TPP and iSOEF definitions. Commercial activities: activities where the SOE undertakes an
orientation towards profit-making that turns out into providing a good or service to a consumer in relevant market
quantities and prices determined by the company. Non-commercial activities: activities carried out to fulfil a public
mission and which consider public (e.g. redistributive, protection vulnerable population or regions, etc.)
a. Yes. Which ones?
b. No
Does the constitution or any high-level law reserve any specific sectors related to digital
services (including fixed-line services, backbone infrastructure, passive infrastructure,
I3
international gateway, etc.) to be provided only by SOE? (Please refer to the legal framework
- law, decree, etc.- that allowed the identification)
a. Yes. Which ones?
b. No
Does the constitution or any high-level law restricts the private sector participation (e.g. FDI
I4 caps, FDI restrictions) in digital-related SOE or markets with presence of an SOE? (Please
refer to the legal framework - law, decree, etc.- that allowed the identification)
a. Yes. Which ones?
b. No
Does the constitution or any other high-level law establish any exemptions or asymmetric
I5 conditions for SOEs with regard to the application of the legal framework? (Please indicate
the respective legal act or regulation analyzed)
a. Yes
Antitrust Law
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
Tax Law
Quality standards
Requirements to provide financial information
Bankruptcy Law
Procurement law
Labor provisions
Safety measures
Environmental law
Other (please specify)
b. No
I6 Are the SOEs systematically required to achieve a commercial rate of return?
a. Yes
b. No
c. No information available
I7 Are the SOEs subject to full tax liability (e.g. same tax rate) as the private sector?
a. Yes
b. No, what is the main difference?
c. Not available information
Do the SOEs have preferential access to tax-credits, tax arrears (e.g. priority access,
I8
extended-time exemptions)?
a. Yes, according to the tax code and related rules
b. Yes, based on practice
c. Yes, but only in specific situations
d. No
e. Not available information
Does the government actively encourage or mandate government agencies to contract ICT
I9
services (telecommunications, data services, mobile payment services) from the SOE?
a. Yes, as explicitly stated in published national policies or government statements
b. Yes, as explicitly stated in internal rules or guidelines
c. Yes, informally
d. No
e. Not available information
Does the SOE benefit from preferential access to capital from the government (national,
I10 regional or local) such as reduced interest rates, government-backed loan, debt guarantees,
capital-injection?
a. Yes
Reduced-interest rates
Government-backed loans
Capital injections
Grants
Acceleration depreciation allowance
Direct transfers
Priority loans through state-owned banks
Other (specify)
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
b. No
c. Not available information
Does the SOE have preferential access to infrastructure (e.g. undersea cables, roaming
I11
services, etc.)?
a. Yes
As subsidiary of an SOE
Free or below-market pricing access to infrastructure facilities
As manager of the infrastructure facility
As regulator of the essential facility
Other, Please specify
b. No
c. Not available information
Can SOEs benefit from other favorable treatments that are not available to private firms
I12 such as direct subsidies or land usage, rights of way, numbering or spectrum rights at lower
prices or using preferential procedures?
a. Yes, as explicitly stated in laws and regulations
b. Yes, as per practice
c. Yes, but only in specific situations
d. No
e. Not available information
Is there an independent competition authority with power and jurisdiction to investigate
I13 potential anticompetitive practices of the SOE (e.g. exclusionary practices, collusion, abuse
of dominance)?
a. Yes, but no SOE in the telecom/ICT/digital sector has been investigated so far
b. Yes, a SOE in the telecom/ICT/digital sector has been investigated. Please explain the case
c. Yes, a SOE in the telecom/ICT/digital sector has been sanctioned. Please explain the case
d. Yes, but SOE in the telecom/ICT/digital sector are exempted from certain practices. Please explain which
practices
e. No, SOE are excluded from the application of competition law
f. No, there is no competition law or no functioning competition authority
Is there an independent sector regulator with power and jurisdiction to regulate and
I14
sanction SOEs operating in the telecom/ICT/digital sector?
a. No, the line ministry (a department within the ministry) is in charge of regulating the SOE
b. Yes, there is a sector regulator
If “Yes”, has the regulator taken any of the following decisions on the SOE in the last five years?
a.1. Declared it as dominant operator (operator with significant market power - SMP) in any market. In which
market(s)? Please explain if the process was initiated but not completed
a.2. Determined charges for interconnection (call/SMS termination rates)? For which services?
a.3. Determined charges and/or conditions to provide access to SOE infrastructure? For which services?
a.4. Imposed conditions to address SMP by SOE. Which conditions? Please explain if the process was initiated but
not completed.
a.5. Intervened to solve a dispute between SOE and other operators. In which case?
a.6. Imposed a fine to a SOE for incompliance with sectoral regulations or obligations. For which infringement?
Does the SOEs in the sector determine the conditions or participate in the decisions for
I15
allowing private sector competitors to enter in the market?
a. Yes
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
If yes, please select all that apply (how?)
Granting the licenses for private competitors
Assigning spectrum to private competitors
Providing proposal/opinion to the regulator who provides the access to private competitors
Providing key documentation or explicit endorsement to private competitors
Determining conditions and prices to access essential infrastructure needed by private competitors
Other, please specify.
b. No
If an SOE performs one or more non-competitive ICT activities and one or more potentially
I16 competitive activities, is there a requirement for this firm to separate the non-competitive
activities from the potentially competitive ones?
a. Yes, which type of separation (e.g. accounting, legal, operational)?
b. No
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
Annex 2: SOEs covered by the questionnaires (by country)
SOEs and countries upon which this paper is based are as follows:
Number of
Country SOEs studied
SOEs studied
• Angola Cables
Angola 3 • Angola Telecom
• Movicel
Benin 1 • Benin Telecom
• Comores Telecom
Comoros 2
• Comores Cables
• Orange Egypt
Egypt 2
• Egyptian Company for Telecommunication
Eswatini 1 • Eswatini Posts and Telecommunications Corporation
Ethiopia 1 • Ethio Telecom
• Gabon Telecom
Gabon 2 • Société de Patrimoine des Infrastructures
Numériques (SPIN)
• Vodafone Ghana
Ghana 3 • AirtelTigo
• National IT Agency
Kenya 1 • Safaricom
• Cable Consortium of Liberia
Liberia 2
• Liberia Telecommunications Corporation
Mauritania 1 • Mauritel
• Mauritius Telecom
Mauritius 3 • National Computer Board
• Fibernet
• Maroc Telecom
Morocco 2
• Orange Maroc
Mozambique 1 • Moçambique Telecom
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
• Sierra Leone Cable Limited
Sierra Leone 2
• Sierra Leone Telecommunications Company
• Broadband Infraco
• Gyro Group
South Africa 4
• MTN South Africa
• Telkom
• Tanzania Telecommunications Corporation (TTC)
Tanzania 2
• Airtel TZ
• Tunisie Telecom
• Orange Tunisie
Tunisia 4
• Ooredoo
• Topnet
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Background Paper: State-Owned Enterprises in Telecommunications and Digital in Africa
Annex 3: SOEs and weak competitive neutrality: impacts on markets
and the implications for development
The presence of SOEs in the market can unintentionally lead to adverse effects and market distortions not
only in the markets in which they operate, but also those markets upstream and downstream, as well as
in adjacent or unrelated markets in some cases (Figure 2.1). Market effects can be broadly categorized
into three groups: (1) effects of SOEs on market functioning and private sector participation; (2) effects of
SOE performance on development outcomes; and (3) effects of domestic SOEs on global markets (World
Bank 2019). SOEs frequently receive exclusive preferential regulatory treatment and/ or state support as
compared to their private sector counterparts. Common measures include direct subsidies, tax
preferences or exemptions, in-kind benefits such as subsidized or fixed price inputs, and concessionary
financing and guarantees. Exclusive benefits create an unlevel playing field between SOEs and private
companies and can influence competition across entire value chains Research shows that state ownership
is rarely associated with productive efficiency.61 Evidence also suggests that preferential treatment to
SOEs may facilitate anti-competitive conduct.62
Figure 2.1. SOE impacts across markets
The implications of inefficient SOEs for development are significant: studies have shown that if SOEs were
just 5% more efficient, GDP could be 1–5% higher.63 The International Monetary Fund (IMF), drawing from
61 The International Monetary Fund (IMF), drawing from a sample of about 1 million firms in 109 countries, finds that SOEs are
less productive than private firms by one-third on average, in part because of poor governance. See IMF (International Monetary
Fund). 2020. Fiscal Monitor. Washington, DC: IMF.
62 Recent studies in South Africa, Ukraine, Philippines and Romania confirm that the lack of competitive neutrality, the absence
of fully-fledged procompetitive provisions in regulation, and a combination of vertical integration and dominance act as incentives
for SOEs to engage in anti-competitive practices. See: World Bank, The Role of SOEs in South African Markets and their Impact on
Competition, (2017); World Bank, Reducing Market Distortions for A Prosperous Ukraine: Proposals for Market Regulation,
Competition and Institutions, (2018); World Bank, The Philippines: Embedding Competitive Neutrality Principles in State Owned
Enterprises, (2018); World Bank, Romania- Country Economic Memorandum 2.0, Markets and People, (2019).
63 For example, in one study a 5% increase in SOE efficiency could have increased GDP by 2% in Turkey, 1.5% in Tanzania, 1.4% in
Bolivia and 2.2% in Mali. See World Bank. 1982. World Development Report 1983: World Economic Recession and Prospects for
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a sample of about 1 million firms in 109 countries, finds that SOEs are less productive than private firms
by one-third on average, in part because of poor governance. In countries with perceived lower
corruption, SOE productivity is more than three times higher than that in countries where corruption is
seen as severe (IMF 2020). Similarly, a global study of very large SOEs from 2001 highlighted that they are
significantly less profitable, more highly leveraged, and more labor-intensive than private sector
comparators.64
There is also growing evidence that competition in network and services sectors is particularly important
to productivity and export gains in other sectors. 65 SOEs are likely to have the most distortive effects in
developing country markets because they generally are smaller and private sector activity is already
constrained by other factors, such as a poor business environment and limited human capital. Weak
regulation, monitoring, and oversight—together with the absence of a well-developed competition
framework—reinforce distorted markets and fail to deter anticompetitive behavior. Further, when
government-backed SOEs in receipt of extensive support are active in foreign markets they face a higher
risk of international disputes and higher tariffs. Regulatory frameworks should be designed to encourage
competitive outcomes even in markets where SOEs are present. Efficient regulation must guarantee
market contestability—even in sectors where SOEs operator and/or there is a natural monopoly. SOEs
and incumbent operators should be exposed to competitive pressure from new or smaller operators to
ensure they operate in an efficient manner and maximize productivity for the benefit of consumer
welfare. A competitive neutrality gap analysis for SOEs in relevant markets can identify obstacles to such
competitive pressure, involving an in-depth analysis of applicable laws, regulations, and policies against a
benchmark of best practices (Figure 2.2).
Recovery (New York: Oxford University Press, 1983) at 75. Another slightly more recent study produced similar results: a 5%
increase in SOE inefficiency could increase GDP by 1% in Pakistan, 5% in Egypt, and 1.7% in South Korea. See Jones (1991) at 179;
Jones (1981).
64 Dewenter, K., and P. Malatesta (2001).
65 See, for example: Hoekman, B., and Shepherd, B., (2015).
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Figure 2.2. World Bank’s Competitive Neutrality Framework
Competitive neutrality
Subsidiarity analysis: the role of the State in the economy
Streamlining the operational Identifying the costs of any Achieving a commercial rate of Accounting for public
form of government given function return service obligations
business • Compensation paid to
• Accounting separately for • SOEs commercial operations and SOEs for the provision
• Legislation requires business commercial and non- investments are required to have of PSOs is based on
separation of SOEs commercial activities of SOEs positive NPV, market consistent transparent
• SOEs objectively assessed rate of returns and to being accountability and
based on transparent measured based on private sector objective criteria.
performance requirements performance • Cross-subsidization is
avoided.
Firm-level principles: Separation of SOE commercial and non-commercial activities
Tax neutrality Regulatory neutrality Debt neutrality and outright Public procurement
subsidies
• Minimal instances of tax • Companies compete on a • SOEs have access to credit on • Market based
exemptions or preferential level playing field for rights to the same terms as private sector competition in public
treatment that benefits invest in state assets, with no operators, and whether they procurement
SOEs, e.g., reduced rates, regulatory preferences and receive subsidies without a clear • Bids/auctions designed
rights of deferral based on market competition economic justification or policy to reduce the risks of
• Sectors where competition is objective bid rigging
feasible are open to private
investment
Principles embedded in cross-cutting regulatory frameworks and sectoral policies
Control of state support measures to SOEs and private sector operators
0 Level playing field in the market between SOEs and privately owned operators
Source: World Bank Group’s Markets & Competition Policy team elaboration.
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GOVERNANCE AND THE DIGITAL ECONOMY IN AFRICA
MAIN REPORTS
VOLUME 1 Digital for Governance: Reaching the Potential for the Digital Economy
in Africa—Digital Tools for Better Governance
VOLUME 2 Governance of Digital: Regulating the Digital Economy in Africa—
Managing Old and New Risks
TECHNICAL BACKGROUND PAPERS
• ICT Procurement in Africa
• Adoption of eGP in Africa
• Vulnerabilities of ICT Procurement to Fraud and Corruption
• Regulating Digital Data in Africa
• Taxes and Parafiscal Fees on Digital Infrastructure Services in Africa
• Corporate Governance and Transparency of State-Owned and State-Linked Digital
Enterprises in Africa
• State-Owned Enterprises in Digital Infrastructure and Downstream Digital Markets
in Africa
• Competition Advocacy for Digital Markets in Africa
• Competition Policy in Digital Markets in Africa
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