Somalia calling

SOMALIA does not spring to mind as a good place to do business, but in telecoms at least it has something to teach the world. A call from a Somali mobile phone is generally cheaper and clearer than a call from anywhere else in Africa. The trick is the lack of regulation. Somalia has had no government since 1991. It was cut off for a while, but then private mobile companies moved in and found that the collapsed state provided a curious competitive advantage.

No government means no state telecoms company to worry about, no corrupt ministry officials to pay off (there is no ministry), and the freedom to choose the best-value equipment. Taxes, payable to a tentative local authority or strongman, are seldom more than 5%, security is another 5% (more in Mogadishu), and customs duties are next to nothing. There is no need to pay for licences, or to pay to put up masts. It is a vivid illustration of the way in which governments, for all their lip service to extending communications, can often be more of a hindrance than a help.

Golis Telecom, based in the northern port of Bossaso, is one of the larger forces in the Somali market. Its chairman, Adan Sheikhdon Ali, hopes for 50,000 mobile subscribers by 2007—not bad for a country where many people still live a nomadic life in the desert beyond a mobile signal. Golis spent $2.7m on Chinese equipment to set up its service and has since expanded its reach across the country, drawing in customers with its low prices. You can call anywhere on the planet on a Golis mobile for $0.30 a minute. Pricing is especially important in Somalia, says Mr Ali, because many potential customers are illiterate and so immune to advertising.

The present dozen or so operators should eventually be whittled down to three or four. To survive, Golis has diversified into landlines and broadband. But even with price wars, profits are high. Somalis' gift of the gab, and the difficulty of getting in and out of the country, put a premium on extended telephone calls. Golis recouped its initial investment in two years. But the risks are also high. Investment is all up front. There is no insurance available. And then there is Somalia itself. From a distance it looks like a free-market nirvana after The Economist's heart; but closer up it better resembles an armed oligarchy, capable of taking anything it wants at the point of a gun—even a Nokia handset.