INTRODUCTION

Market concentration measures are crucial in evaluating the competitive dynamics within a
market. They help regulators assess the potential impact of mergers, market power, and the
likelihood of anti-competitive behavior. The two most commonly used measures are the
Concentration Ratio (CR) and the Herfindahl-Hirschman Index (HHI). The Concentration Ratio
represents the combined market share of the largest firms in the market. It is expressed as a
percentage and provides a straightforward indication of the extent to which a few firms dominate
the market. The HHI is a more comprehensive measure of market concentration. It considers the
market share of all firms in the market and gives more weight to larger firms (Carlton & Perloff,
2005). The HHI is calculated by summing the squares of the market shares of all firms. The HHI
ranges from close to 0 (for a highly competitive market with many small firms) to 10,000 (for a
monopoly).

n
CR n=∑ S i
i =1

n
HHI =∑ Si2
i=1

Where:

 𝑆i is the market share of the 𝑖i-th firm.

 N is the number of top firms considered (e.g., 3 for CR3).

APPLICATION TO MOBILE NETWORK OPERATORS IN ZAMBIA

Using the data from the Zambia Information and Communications Technology Authority
(ZICTA) for 2024 market share:

 Airtel Zambia: 48.6%

 MTN Zambia: 32.6%

 Zamtel: 18.8%

CR 3=48.6 %+32.6 %+18.8 %=100 %

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This indicates that the top three firms completely dominate the market, holding 100% of the
market share.

2 2 2
HHI =48.6 +32.6 +18.8 =3778.16

An HHI of 3778.16 is well above the threshold for a highly concentrated market, which is
generally considered to be 2,500. This high HHI indicates significant market power concentrated
in the hands of a few firms.

Implications of High Market Concentration in Zambia’s Mobile Network Market

The high Concentration Ratio (CR) and Herfindahl-Hirschman Index (HHI) for Zambia’s mobile
network market suggest significant implications for market dynamics, consumer welfare, and
regulatory oversight. This detailed exploration will cover the potential consequences of such
high concentration levels, focusing on market power, competitive practices, pricing, innovation,
regulatory scrutiny, and potential interventions.

1. Market Power and Competitive Practices

Increased Market Power

The high CR and HHI indicate that Airtel Zambia, MTN Zambia, and Zamtel have substantial
market power. Market power refers to the ability of a firm or group of firms to raise and maintain
prices above the level that would prevail under competition, thus harming consumers (Motta,
2004). The dominance of these three operators means they can potentially dictate market terms,
affecting pricing, service quality, and innovation.

Anti-Competitive Practices

When market power is concentrated in a few firms, the likelihood of anti-competitive practices
increases. These practices can include:

 Collusion: Firms may explicitly or tacitly agree to set prices, limit production, or divide
markets. Collusion reduces competition, leading to higher prices and lower output
(Carlton & Perloff, 2005).

 Price Fixing: Dominant firms might engage in price fixing, where they agree on prices
rather than competing against each other. This practice can be difficult to detect and can

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 occur even without explicit agreements, as firms may follow a leader's pricing (OECD,
2020).

Consumer Harm

High market concentration can lead to reduced consumer choices and increased costs. With
fewer competitors, consumers may find themselves with limited options for service providers,
leading to a lack of competitive pressure to lower prices or improve services. This situation can
be particularly detrimental in essential services like mobile communications, where access and
affordability are critical (Scherer & Ross, 1990).

2. Impact on Prices and Innovation

Higher Prices

In highly concentrated markets, the dominant firms have less incentive to lower prices. Without
the pressure of significant competition, these firms can maintain higher price levels, leading to
increased consumer expenses. Studies have shown that in markets with high HHI, prices tend to
be higher due to the reduced competitive threat (Baker, 2019).

Reduced Innovation

High concentration can stifle innovation as dominant firms may not feel the need to innovate to
maintain their market position. Innovation is often driven by competitive pressure from smaller
firms and new entrants. In a highly concentrated market, these smaller players may struggle to
survive, reducing the overall innovation within the industry. This stagnation can lead to fewer
advancements in technology and services, ultimately harming consumers (Tirole, 1988).

Barriers to Entry

New entrants face significant barriers in highly concentrated markets. These barriers can include
high initial investment costs, regulatory hurdles, and the need to compete with established firms
that have significant market power and resources. As a result, potential new competitors may be
discouraged from entering the market, further entrenching the dominance of existing players
(Porter, 1980).

3. Regulatory Concerns and Merger Scrutiny

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Vigilance in Monitoring

Given the high HHI and CR3, regulatory authorities in Zambia must closely monitor the market
for signs of anti-competitive behavior. Regular audits, market studies, and consumer feedback
can help identify any irregularities or practices that may harm competition. Active monitoring is
crucial to maintaining a fair and competitive market environment (Gellhorn et al., 2004).

Scrutiny of Mergers and Acquisitions

Any proposed mergers or acquisitions involving the major players in the Zambian mobile
network market should be scrutinized rigorously. Mergers between large firms in a concentrated
market can significantly raise the HHI, further reducing competition and potentially leading to
monopolistic conditions. For example, a merger between Airtel Zambia and MTN Zambia would
create a behemoth with even greater market power, likely resulting in higher prices and less
innovation (Bork, 1978).

Regulatory Intervention

To mitigate the negative effects of high market concentration, regulatory authorities in Zambia
might consider several measures:

1. Enforcing Anti-Collusion Laws

Strengthening the enforcement of anti-collusion and anti-price-fixing laws is essential.

Regulatory bodies should have the authority and resources to investigate and penalize firms
engaging in these practices. Effective enforcement can deter firms from engaging in anti-
competitive behavior, thereby promoting fair competition (Elhauge & Geradin, 2011).

2. Encouraging Market Entry

Facilitating the entry of new competitors can help dilute the market power of dominant firms.
This can be achieved by:

 Reducing Regulatory Barriers: Simplifying the regulatory requirements for new

entrants can lower the costs and complexities of entering the market (OECD, 2020).

 Providing Incentives: Offering incentives such as tax breaks, grants, or access to

funding can attract new firms and foster competition (Motta, 2004).

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3. Promoting Consumer Protection

Implementing robust consumer protection policies is crucial in a highly concentrated market.

These policies can include:

 Price Caps: Setting price caps can prevent dominant firms from charging excessively
high prices (Littlechild, 1983).

 Quality Standards: Ensuring that firms maintain high service quality can protect
consumers from the adverse effects of reduced competition (Vickers & Yarrow, 1988).

4. Enhancing Regulatory Framework

Strengthening the regulatory framework to include provisions for regular market assessments
and the power to intervene when necessary can ensure a competitive market environment. This
includes:

 Periodic Market Reviews: Conducting regular market reviews to assess competition

levels and market health (Wright & Stone, 2020).

 Corrective Measures: Implementing corrective measures such as divestitures or the

breakup of firms that hold excessive market power (Elhauge & Geradin, 2011).

APPLICATION TO THE TERTIARY EDUCATION SECTOR IN ZAMBIA

Based on recent data, the market shares of major tertiary institutions in Zambia approximately
are:

 University of Zambia (UNZA): 30%

 Copperbelt University (CBU): 25%

 Mulungushi University: 15%

 University of Lusaka (UNILUS): 10%

 Zambian Open University (ZAOU): 5%

 Other institutions: 15%

CR 4 =30 %+ 25 %+15 % +10 %=80 %

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This indicates a relatively high concentration, with the top four institutions holding 80% of the
market.

2 2 2 2
HHI =30 +25 +15 +10 =2100

An HHI of 2100 indicates a moderately concentrated market. While not as concentrated as the
mobile network sector, this level still suggests a significant concentration of market power within
a few institutions.

Implications of Market Concentration in Zambia's Tertiary Education Sector

The Concentration Ratio (CR) and Herfindahl-Hirschman Index (HHI) for Zambia's tertiary
education sector suggest moderate market concentration indicating a significant, but not extreme,
concentration of market power among a few institutions.

1. Market Power and Competitive Practices

Market Power in Tertiary Education

A CR4 of 80% and an HHI of 2100 indicate that a small number of institutions—specifically, the
University of Zambia (UNZA), Copperbelt University (CBU), Mulungushi University, and the
University of Lusaka (UNILUS)—hold substantial market power in Zambia’s tertiary education
sector. This market power can affect various competitive practices within the sector.

Reduced Risk of Collusion

While the market is moderately concentrated, the risk of collusion among these institutions is
lower compared to highly concentrated markets such as the telecom sector. This is due to the
diverse objectives and governance structures of educational institutions, which can include
public universities with different funding models and priorities compared to private institutions
(Marginson & Considine, 2000).

2. Impact on Pricing and Access

Tuition Fees and Affordability

Moderate concentration in the tertiary education sector can lead to higher tuition fees, but not to
the extent seen in highly concentrated markets. Institutions with significant market power might

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increase tuition to capitalize on their reputations and perceived quality. However, competition
from smaller or less dominant institutions can help keep fees relatively in check (Ehrenberg,
2006).

Access to Education

Market concentration can also impact access to education. Dominant institutions might prioritize
higher-paying programs or international students to maximize revenue, potentially limiting
access for local students from lower-income backgrounds. Policymakers must ensure that higher
education remains accessible to a broad demographic (Johnstone, 2003).

Quality of Education and Innovation

Maintaining Educational Standards

The institutions holding significant market share in Zambia’s tertiary education sector are likely
to maintain high educational standards to preserve their reputations. However, moderate
concentration means there is still enough competition to encourage continuous improvement and
innovation in teaching methods and curricula (Altbach, Reisberg, & Rumbley, 2009).

Encouraging Innovation

Moderate concentration allows for a balance between stability and innovation. While dominant
institutions may have the resources to invest in cutting-edge research and new programs, smaller
institutions often drive pedagogical innovations and specialized programs that can differentiate
them in the market. This dynamic can foster a healthy competitive environment that benefits
students (Salmi, 2009).

3. Regulatory Concerns and Oversight

Monitoring Market Dynamics

Given the moderate concentration indicated by the CR4 and HHI, regulatory authorities in
Zambia must monitor the market to ensure fair competition. Regular assessments can help detect
any anti-competitive practices or shifts in market power that could negatively impact students
and other stakeholders (Teixeira et al., 2017).

Evaluating Mergers and Collaborations

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Proposed mergers or collaborations between major institutions should be carefully evaluated.
While such moves can enhance resource sharing and program quality, they can also increase
market concentration. Regulators must balance these potential benefits against the risks of
reduced competition and higher barriers for smaller institutions (Hüfner, 2003).

Regulatory Intervention

 Promoting Competition

To foster a competitive environment, regulatory bodies might consider implementing policies

that encourage diversity and competition among institutions. This could include funding
incentives for smaller institutions, support for new entrants, and policies that promote equal
access to education (Douglass, King, & Feller, 2009).

 Ensuring Fair Access

Regulatory measures should also focus on ensuring fair access to education for all segments of
the population. This can involve financial aid programs, scholarships, and other support
mechanisms to help students from disadvantaged backgrounds gain access to top-tier institutions
(Altbach et al., 2009).

 Quality Assurance and Accreditation

Enhancing quality assurance and accreditation processes can help maintain high standards across
the sector. By setting rigorous benchmarks and regularly assessing institutions, regulators can
ensure that all institutions, regardless of size, provide quality education (Harvey & Williams,
2010).

CONCLUSION

The concentration ratio and the Herfindahl-Hirschman Index provide a quantitative basis for
understanding market concentration in key sectors. They are essential tools for regulators to
ensure competitive markets, protect consumer interests, and promote economic efficiency. The
Concentration Ratio (CR) represents the combined market share of the largest firms in a market,
expressed as a percentage, providing a straightforward indication of the extent to which a few
firms dominate the market. The Herfindahl-Hirschman Index (HHI) is a more comprehensive
measure of market concentration, considering the market share of all firms and giving more
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weight to larger firms by summing the squares of the market shares of all firms. The mobile
network sector in Zambia is highly concentrated, indicating substantial market power held by
Airtel Zambia, MTN Zambia, and Zamtel, raising concerns about anti-competitive practices and
necessitating vigilant regulatory oversight. In contrast, the tertiary education sector, shows
moderate concentration, suggesting significant but less extreme market power among key
institutions like UNZA, CBU, Mulungushi University, and UNILUS. While there are risks of
higher tuition fees and limited access, competition from smaller institutions and diverse
governance structures can help maintain quality and innovation, necessitating balanced
regulatory strategies to ensure fair competition and access.

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