Government cautioned against Telkom Kenya privatization

May 17, 2007 • Top Stories

A section of telecommunication players on Thursday criticized plans to privatize Telkom Kenya Limited terming the move as unwise and saying the Government’s involvement in the company is still required.

Former Permanent Secretary in the Ministry of Information and Communication James Rege said the Government should own at least 51 percent of Telkom in order to ensure that it does not lose the opportunity to influence the cost and access of telecommunication services throughout the country.

“This is what is needed to make the company big so that it can provide business for small operators so that they can roll out internet connectivity services throughout the country,” he added.

Speaking to Capital Business News, Rege said if the company is fully privatized, the Government risks losing about Sh2.8 billion that has been spent to roll out broadband wireless services in rural Kenya.

The establishment of the digital village networks throughout the country seeks to create Information and Communication Technology hubs in principal towns that will be networked within themselves, through which people can access the internet.

“If this happens (the privatization), it will be impossible to offer free internet for schools. There is no private sector that can be able to do that even with development partner funding,” he asserted.

Rege added that contrary to reports that Telkom lacked the professionalism to drive it to profitability, the actual position was that it has the right management needed to improve efficiency.

“The company is making a come back in terms of profits after the recent restructuring,” he noted.

The corporation seeks to retrench about 12,000 employees. The first phase of staff retrenchment was done in May last year at a cost of Sh2.1billion.

As part of the privatization process, the Government plans to offload 26 percent in Telkom to a strategic partner and a further 34 percent to the public.

Elsewhere, Telkom South Africa on Wednesday announced its interest in bidding for the Second National Operator (SNO) license.

Chief Executive Officer of Africa Online John Joseph said this is an opportunity that cannot be ignored in the company’s business pursuits in Kenya.

Telkom South Africa was not among the seven companies that initially bid for the failed initiative to acquire the SNO for the country.

Information Minister Mutahi Kagwe on Wednesday said he was working on new legislation to make the SNO offer more attractive and would be advertising for bidders soon.

His announcement came barely a month after the Government announced plans to shelve the 30 percent shareholding rule to allow strategic partners in the telecommunication sector to look for local partners.

The rule, that required a foreign company investing in the telecommunication sector to allocate a 30 percent share to locals, frustrated potential partners.

It caused problems with local partners in consortiums who failed to meet their financial obligations in paying for their license fees.

In March this year, the Communication Commission of Kenya (CCK) cancelled the award of tender for the SNO after Reliance Communications consortium failed to meet the March 15th deadline to submit their application.

In January, Vtel Holdings also lost its bid to operate Kenya’s second fixed-line phone network after it failed to meet requirements set by CCK.

CCK terminated the offer after a disagreement among Vtel’s partners in Kenya over payment for the license to operate the network.

Source: Capital FM



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