Wednesday, January 19, 2005

Cheap Canadian Phone Cards, Crazy Kenyan Cellular Non-Connections...


1.0. An Essay Conceived in Resentment.

Yes, you may as well put that fact in your kiko and smoke it right away.

This essay has been spurred on by romance, bottled hasira and a misguided quest for good deals in Quebec's ethnic market. It is an intervention that has been incited by those polite but obnoxious Safaricom and Celtel messages in Kiswahili brightly reminding you that you still cannot get through to your party in Nairobi, or as is my case, Mombasa...

And that is why I dedicate at least one portion of this not so massive missive to my one and only mshikaji.

When I am finally able to get through, I will read her the first four paragraphs of this digital.

Let me explain.

After I had FAILED TOTALLY, in my 592nd attempt to hear the familiar, friendly, jovial and sexy voice of my mshikaji at the other end of the line, I finally stopped cursing the card company, the telephone and of course, the Kenyan based mobile operator who, to my mind were all in cahoots, plotting deviously, to keep me apart from my honey.

Whenever my voice or her voice starts breaking up in the middle of our often interrupted cellular trysts, she begins trotting out her " David, money has been poured" jocular reference while fretting at the imminent disruption. By the way, she is among five people in the entire world who will get me to respond when I am addressed by that Jewish monarch's moniker...


2.0. An Engineer Switches on a Lamp


I was saying that I finally stopped cursing.

Instead I used that very phone card which could not get me through to Kenya to call long distance to a country that is not in Africa, Asia or the Caribbean.

Luckily my engineering friend who has more than passing familiarity with the telecommunications industry picked up his phone.


That sort of restored my shattered faith in the scientific and technological breakthroughs that have swept through the world of telephony for the last eight years.

I got straight to the point after the inevitable pleasantries.

"Tell me something", I implored.

"What happens when I use a phone card to call Mombasa and it fails to go through, no matter WHEN I call, and no matter WHAT card I use?"

He was a bit surprised that I was calling him because I actually wanted to write an entire essay about cheap phone cards and faulty Kenyan mobile connections.

I have a sneaking suspicion that he had coyly opted to kind of humour me, you know indulge me for a few minutes to see if I was actually serious. He soon clued in that my intent was not of the frivolous kind.

3.0. Technical Glitches? What Glitches? Get Real!

In a nutshell, this is what I gleaned from my industry insider pal:

First of all, it is actually possible that when you call and don't get your party that the lines are actually "busy", congested or what not. If you call at a time when everybody and their cat are calling Kenya, good luck! If you called Nairobi at the time when those horny MPs were busted on Koinange Street with those undergraduate hookers, double dose of good luck!

Secondly, he explained to me that if you are using a phone card the carriers consider you to be a cheapskate insect compared to those pricey lions who call directly from their land lines and cellphones. Your frustration levels are directly proportional to how cheap you are, was his blunt message. People who call directly get connected at higher rates compared to those pesky phone card users( who are more likely than not to be ethnic immigrants like Onyango Oloo). So big surprise if they get connected more often too- you pays your money and you talks to your heart's content.

Thirdly, the culprit may be in the very card you are clutching in your hand after scratching out the PIN. You see, my mhandisi rafiki told me, sometimes a phone card company is a shoe string operation consisting of a T1 line and a computer in someone's basement in Toronto, Montreal, Boston, Dallas or Chicago. This jua kali phone card entrepreneur wants to minimize his or her costs by rerouting your call through the cheapest carrier as possible. In this connection he explained to me that sometimes(not all the time) sometimes when you are startled by someone addressing you angrily and incoherently in Korean, Ukrainian or Greek it is because, yes, you have been rerouted to Seoul, Kiev or Athens.

Sometimes it is simply Telkom Kenya's fault, so you can blame them too. What happens, I found out, Telkom Kenya simply limits the number of phone calls that can make their way to Kenya. Why, I hear you wonder incrediously with eyebrows arched. Here is the deal. You see, when suckers like Oloo call Kenya with their cheap phone cards, Telkom Kenya does not make as much money as when Kenyan based subscribers are CALLING OUT, long distance. So it is sometimes more profitable if not so many people call.

And yes, Safaricom and Celtel, they are not off the hook either. Remember there is a pecking order of phone calls with the top billing going to those who dial directly. So the Kenyan mobile companies may thwart a telephonic romantic rendezvous simply because they are in the business of making profits, not sustaining long distance relationships.

And there is just plain utapeli, ulanguzi and ugongaji. My friend asked me if I remember a time a couple of years ago when getting through to Kenya was just like that, rahisi kama maji inayotiririka mferejini. Part of the reason had to do with some shady, criminal shenanigans going on. Some crooked, well-connected Kenyan individuals had simply stolen some of the lines to Kenya and were making a mountain of muthendi through these rerouted connections. By the time they were busted, they made some decent chums, you see. And given the endemic corruption back home, we can not rule out the possibility that lines are still being swiped in return for some TKK.

My friend had to run so he left me stranded, dangled ball point pen in mid air waiting eagerly to jot down point seven through sixteen or something like that.

What shocked me most was that TECHNICAL GLITCHES were NOT THE MAIN REASON why you cannot get through to Kenya easily using a phone card from Canada.

Hearing a very apolitical technocratic engineer tell me frankly that the leading explanation for poor mobile service is POLITICAL and BUSINESS related was a bit of a shock even to this political animal called Onyango Oloo.

3.0. A Thumb Nail Sketch of The Canadian Phone Card Industry

If you are an immigrant and living in Canada and if you have ever been near any kind of telephone- land line, cell phone or pay phone- you have probably heard of Ola and Cici, two of the most ubiquitous long distance phone cards on the market. I used to assume that the company was started by some retired Colombian drug dealer or a rightwing Central American death squad commander who escaped to this country with a truck load of pesos that they quickly converted into Canadian loonies and twoonies that were quickly stashed away in a network of CIBC, Bank of Montreal, TD Canada Trust and Royal Bank of Canada discreet accounts.

Not so my friends, not so.

The owners of Ola and Cici come from a Middle Eastern country that starts with the letter "I".

No, it is not Israel.

Nor is it Iraq.

Try Iran, which Condeleeza, Rumsfeld and Wolfowitz are planning to transform into another post-war Iraq if they can...

Here is the skinny on Gold Line the company owned by this Greater Toronto Area Iranian couple.

Immigrants take the business of phonecards so seriously that some of them have launched an entire discussion forum just to discuss nothing else but phone cards.

And some of them have gone further to set up sites on the internet where they actually rate the various phone cards on the market. By the way I actually echo the sentiments of the irate person who was fulminating against the TOP family of phone cards. They are such a rip off! One of the cousins of TOP, the card called "Pride"(what a joke!) or something with a lion on top is so bad that if you make the mistake of waiting for the call to go through for more than forty five seconds you find dollars chopped off the value of the card even if the calls do not go through! Hebu imagine!

Yes. That felt good. And now it is officially documented: Oloo's vengful rant against a specific phone card. That was IMPORTANT and CRUCIAL ama?

4.0. How Do Capitalists Calculate Profits?

Most people think that profits are simply what you are left with after you have subtracted your costs from your gross revenue.


If only it was THAT SIMPLE.

Let me break it down for those unfamiliar with how it works.

If you happen to have the Eighth Edition of Managerial Accounting by Anderson and Sollenberger handy (yes I admit it, my own copy is dog eared and ancient, having come out in 1992) could you please turn to this paragraph at the bottom of page 135, just below that box case scenario featuring the mythical Skip Johnson and his phantom C&J Clothiers:

A management...desirous of estimating profits at specific operating levels, preparing budgets, or controlling costs effectively and efficiently needs an understanding of how revenues, costs, and volume interact to provide profits. With this understanding, management performs any number of analyses that fit in a broad category we call cost-volume profit analysis. At a minimum, management must identify its activities and cost drivers and the variable and fixed costs incurred as a result of these activities and cost drivers. The accuracy of cost behavior estimation depends heavily on the condition of the data available within a company and the methods used to separate variable and fixed components. Cost-volume-analysis, as its name implies, looks at the interaction of factors that influence the level of profits. Although the name...leaves us with the impression that only cost and volume determine profits, a number of factors exist that determine whether we have profits or losses and whether profits increase or decrease over time. The key factors are:
1.Selling prices.
2.Volume of sales.
3. Unit variable cost.
4. Total fixed cost.
5. Sales mix(combinations in which various product lines are sold).

...One (important relationship among the above factors) is between variable cost and sales. The excess of sales revenue over variable cost is called the contribution margin. The contribution margin also equals the sum of fixed costs and profits. A second relationship is between contribution margin and profit. The contribution margin per unit multiplied by the change in volume equals the change in profits. Therefore, the financial impact of decisions involving volume changes can be assessed using contribution margin. A third relationship is between fixed costs and the contribution margin. When the two equal, the company has a break-even point; profit is zero....

"Managerial Accounting" (8th Edition) by Lane K Anderson, PhD,CPA, CMA Professor of Accounting, Texas Tech University and Harold Md Sollenberger, DBA, CPA, Professor of Accounting, Michigan State University

A related concept is Return on Investment which can be described as what you get when you divide profit by investment which can be further clarified as having two elements namely profit divided by sales times sales divided by investment. The first term is known by the shorthand ROS (return on sales) aka the profit margin which is simply a measure of the relationships among sales, expenses, volume and profit. The second term is called asset turnover which measures the ability to generate sales with the assets with the sales a subunit employs.

These two concepts in turn form part of what accountants call earning power ratios including the current ratio, the acid test ratio (also called the quick ratio), the operations cash flow to current debt service ratio, the debt to equity ratio, equity to total assets, and related concepts like common equity multiplier, dividend payout percentage, asset quality, inventory turnover, book value per share, earnings per share etc etc...

5.0. Why Single Companies Have Many Phone Cards

The preceding section has hopefully delineated the complex accounting reasons why people who are in the phone business decide to put out cards for $20, $10, $5 and of late even $2.50 and $1. More than these profit, market segmentation considerations will lead a company like Goldline to have not only Ola and Cici, but others as well and why you find to your shock that Call Value, Bravo, Millenium and Grand all have the same Montreal access number because they are from the same stable with Call Value serving the North American market, Bravo going after Europe and Millenium sometimes targeting Latin America and the Caribbean. Compared to the problematic TOP they only give 10 to 13 minutes on a five dollar card compared to TOP's 19 minutes on a similarly priced card. I do not know about other parts of Canada, but from Montreal, the go to phone card, at least for me, is the card called Baron. Baron rules OK? A $2.50 gives you eleven minutes; a $5.0 card gives you 21 minutes to a cell phone in Kenya. And it gets through more often than those TOP pranksters. Listen do not even start: I am NOT reselling Baron cards from my living room via phone...

One would then expert these companies also to try, if they can to maximize their profits through lower variable costs ( like rerouting your call through the cheapest means possible) increased volume sales( that is why they flood the convenience stores and flea markets in ethnic neighbourhoods) passing their costs to the consumer ( through hidden charges) and outright scams perpetrated by fly by night shysters who declare bankruptcy suddenly leaving hundreds of small convenience store owners and consumers in the lurch, dazed and confused, clutching dozens of worthless cards- only to re-enter the same market a few weeks later as an allegedly new kid on the long distance phone card block.

6.0. Going Back to Kenya and Telkom, Safaricom, Celtel Etc

Right now Telkom Kenya has everybody by their figurative gonads because it is a neo-colonial state monopoly.

And given what we know of endemic corruption in Kenya you can expect a lot of Anglo Fleecing shadiness going on if you bother to dig deeper. And we know that the Meralis of this world are more concerned about making $20 million in a single day by selling their stakes to the Celtel's of the world who in turn will cut as many corners to turn a profit, especially as long as Telkom Kenya continues to hold all the cards, as it were.

So where is the way out?

On July 26, 2004, I wrote an essay that exposed not only the shadiness in the ECONET deal, but some pretty sordid moves by some diaporic Kenyans who want to get their fingers in the lucrative Kenyan telecommunications market. Click here to read that essay.

How many of NARC's ministers from

Raphael Tuju to

John Michuki are setting up side deals and front companies to take advantage of the expected further liberalization and deregulation of the Kenyan telecom sector?

Whose palms are being greased as we speak as a consortium of local and international players gear up for a run at the third mobile provider and the second national carrier?

Me thinks I smell a bigger pong than the stench from the Anglo Fleecing latrine.

Excuse, let me try and reach my mshikaji one more time before I head to the CKUT studios to host this week's DUNIA- which by the way, will feature the last speech that

Martin Luther King gave on April 3, 1968, the night before he was shot plus

Malcolm X's

1963 Message to The Grass Roots, where he is sharply critical of Dr. King. But just to spice things up, I will start the show with a showcase of the exciting Rusha Roho beats from Tanzania. I am not saying anything further...

Onyango Oloo



Kenya Democracy Project said...

FEEDBACK from the Mambo Gani Forum:

excerpted on Thursday, January 20, 2005


Yesterday, 05:21 PM

Mr. Onyango,

Thank you for explaining and for highlighting some of the reasons why I sometimes want to bang my head against the wall when calling Kenya.

I have tried all the cards available here, finally stuck on IDT call Africa. Sometimes, I will try for 2 days and when I get through, the connection is soo horrible, the static /breaking up is painful.

I used to curse all the time saying Kenya Telkom needs to style up.. well they still need to but kumbe there is more!!

Calling Uganda is a piece of cake and actually cheaper. Calling landlines is not a problem at all neither is calling a mobile.

I can count the number of times I have gotten through to family on a landline in Kenya. The whole process... is just

let me stop ranting.

otherwise thank you!


Yesterday, 09:15 PM

OO, you briefly touched on the subject of a highly complex and little understood subject of what is officially called Telecommunications Interconnect Finance, which I will endeavour to shine some light on.

There are three kinds of telecommunications companies: network providers, service providers and resellers.

The network providers are those that own the wires, fibre optic cables, satellites and so on. Their costs are the capital and maintenance costs associated with running this hardware. Their revenue is made by selling 'capacity' on these networks.

The service providers are those that buy 'capacity' from the network providers and sell 'time' to end customers.

The resellers are those people that buy very large volumes of 'time' from service providers, so get a cheap price. Then they sell this time on to consumers at a slightly inflated price (but cheaper than the service provider) to make a profit.

If we imagine a hosepipe, the network provider owns the rubber hose, the service provider owns the water, and the reseller buys massive volumes of water and resells small volumes of it for a profit.

For every phone call there are costs and revenues and profits. The network provider gets a bit of the action, the service provider gets a bit of it and if there's a reseller (like a card company), they expect their cut too of course.

For each phone call however, it is very rare indeed that the phone call uses one network provider, one service provider and one reseller.

For a call using a card from a mobile in London to a Kencell in Mombasa, the following happens (and all of these people have a cost, a revenue, an invoice, a settlement and a profit).

The call is routed from an Orange contract, using a Card reseller to a Vodafone base station through a British Telecom network, to an Worldcom satellite, to a Cable & Wireless Satellite to a Telkom Kenya satellite receiver and network to a Safaricom base station and finally to a Kencell contracted handset.

For such a call there is one reseller, four service providers, five network providers. There are transactions between the Card company and Orange UK, and then a multitude of transactions between Orange UK and the five network providers, a transactions between Kencell and Telkom Kenya and a multitude of transactions between Kencell and the five network providers. Multiply this by the zillions of calls made per day, the global number of network providers (carriers) and you'll get some idea of the complexity of interconnect finance accounting.

Suffice to say that most of these transactions are handled through a complex international settlements system - the company doesn't settle each transactions, but once a year might settle its account with say Telekom Uruguay for the small number of calls. One cal also trade in the debts, in fact settlement of these transactions globally are often handled by what are called Factoring companies, whereby they get money from Telkom Kenya and a thousand other telecom companies, and charge them to cancel all the two way debts between the companies. This works out cheaper for Telkom than hiring a huge department of people wo work it all out themself.

So for any call, there are a zillion possible routes, and a zillion possible places the call might fail in connections between various networks and so on.

It is indeed in telkom's interest to limit th ecapacity of incoming call traffic, because doing so limits the costs of interconnect finance.

Onyango Oloo

Today, 11:52 AM


Thanks for those valuable insights. I love Mambo Gani for the serious, insightful and intelligent interventions(well let us forget about one or two cases) that pepper this forum. It is truly a template that ALL Kenyans online sites can learn from.

Thanks to your post, I am now further educated about this subject which like I said in my essay was sparked by my futile attempts to call back home.

Thanks again. Let us keep up the many sided conversations....

Onyango Oloo

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sharma said...

This is nice the network provider owns the rubber hose, the service provider owns the water, and the reseller buys massive volumes of water and resells small volumes of it for a profit. I can count the number of times I have gotten through to family on a landline in Kenya. The whole process..
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