It all started with a Tweet which called out on Elon Musk to come and invest in Tanzania to which Musk responded that Starlink is soon coming to Tanzania and that they are just waiting for government approvals. The Minister for Information, Communication and Information Technology, Honourable Nape Nnauye, responded to Elon Musk’s twitter stating that the application was already reviewed and that Starlink was to meet some requirements that were outstanding.
Twitter Tanzania went wild! Everyone was scurrying to welcome Elon Musk’s investment in Tanzania and wondering why it was taking so long. The star effect of Elon Musk is undeniable however, regulatory officials need to look past the stardom and look at the merits of the investment.
Starlink is a satellite internet constellation operated by SpaceX providing satellite Internet access to most of the Earth. The constellation consists of about 2000 satellites and the number is growing. Starlink is a gamechanger because it provides high-speed, low-latency broadband internet connections to parts of the planet that are traditionally underserved, like rural areas, and it also offers more competitive pricing in urban spaces.
What is the process of setting up the Starlink Investment in Tanzania?
The most important asset in this investment are the licenses issued by the Tanzania Communication and Regulatory Authority (TCRA) under the principal legislation The Electronic and Postal Communications Act. The Starlink investment requires a network facility license as well as a network services license so we can assume this is what has been applied for. Starlink would have to register a company in Tanzania in order to apply for these licenses and in its business plan, it should show that 25% of the share capital will be offered to the public, that is to be listed on the Dar Es Salaam Stock Exchange. So far only one operator, Vodacom, has complied with this. The rest of the operators are probably waiting for the condition to go away given how long it is taking them to comply.
Having assisted several companies with acquiring licenses from the TCRA, I am familiar with the process and can make the following assumptions about the lens under which TCRA is examining the application.
- The number of jobs created and the broader economic impact of the investment.
- In examining the number of jobs that will be created, some have been thinking that Starlink may not pass the bar in comparison to other network service providers that are already in the market and that employ 1000s of people.
- While Starlink may give jobs to local suppliers who will be collecting the subscription payments, distributing the connection devices and repairing the same, and also a call centre as per requirement of the law which may be a source of employment, this does not compare to the number of jobs and employment that local telecommunication operators produce.
- The potentially lean operations of Starlink in local jurisdictions may have to do with the fact that they are not targeting individual, retail and business customers like local telecommunication operators, but mainly corporations and government institutions.
- The projections in annual sales and the taxes that will be paid
- TCRA will look at the Annual gross turnover that is projected and calculate the taxes to be paid to TVRA (1% of annual gross turnover) and also the taxes that will be paid to the Tanzania Revenue Authority namely Service development levy, Pay as your earn, social security, income tax on profit, value added tax and soon the universal health bill tax.
- Given the lean structure of the operations and in comparison to local telecommunication companies, the government may be collecting less.
- This is relevant if Starlink does indeed outdo the competition and gains market share at the detriment of local telecommunication companies who are making significant contributions to the government coffers.
- Safety measures and safeguards
- The satellites are particularly sensitive to weather conditions, and it has been reported in countries like the US that the service has been down for hours and sometimes days due to things like overheating.
- Given that Starlink is a start up and still going through trial and error, it is possible that they do not yet have proper safeguards as they are testing and figuring things out as they develop. This may not be satisfactory to the regulators.
- In addition to the above, it is likely that the local telecommunication operators who are known for providing shoddy services at an overprice to their customers are viewing Starlink as a major threat. The local operators’ big chunk of revenue comes from data and Starlink promises to provide better service. It has been said that there are lobbyists that are trying to ensure that Starlink does not enter the market and, knowing how things go in Tanzania and how big companies love monopolies and limited competition, this speculation is probable rather than not.
- Elon Musk’s interest in Tanzania is a big boost to investment in Tanzania, especially after the US-Africa Leaders’ Summit 2022 where USA has been rekindling the flame with Tanzania especially through its businesses. If Elon Musk manages to jump through the loops and the investment is approved, this might signal a green light for other investors from the United States to come in.
- Although the aim is for Musk’s investment to acquire operating licenses and start operating by March 2023, knowing how things go in Tanzania, I would say if TCRA does give this investment impartial consideration, that we may see things move in the fourth quarter of 2023. Pole Pole (slowly slowly!)
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