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Kenya: Government set to license fourth mobile operator

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The Government is set to issue a fourth mobile phone licence as it sweetens the sale of a majority stake in Telkom Kenya to strategic investors.

The fourth licence will be issued to Telkom Kenya together with a third generation licence, which allows the transmission of data, images and highspeed Internet on mobile communications, opening another window for intense competition in cellular communications.

Telkom will rival Safaricom, Celtel and and Econet Wireless, although Econet is yet to resolve its ownership structure to get a licence.

Investment Secretary Esther Koimett told six investors who are interested in the Telkom stake— Telkom South Africa, Telkom France, Reliance from India, British Telkom, Tata and VSNL of India and Alkazar of Kuwait —during a pre-bid conference that the licences will be issued by November 29.

But Telkom Kenya will be required to pay a licence fee of $55 million (Sh3.9 billion) —similar to the amount paid by Safaricom and Celtel. Econet is being asked to pay $27 million .

Ms Koimett said the Government would facilitate the issuance of Telkom licence fees .

The licences are aimed at enhancing Telkom’s performance in the countdown to an initial public offering, which Finance minister Amos Kimuya said will be floated once the company meets the Capital Market Authority (CMA) listing requirements.

“We could have gone to the IPO even this year but we need to meet the CMA requirements,” said Kimunya. Among the requirements is that the company must have made profits for not less than five years. The majority partner is being brought on board to aid this process.

The transaction structure is in two phases, the first ceding a 51 per cent stake to the strategic partner. The second is the IPO phase where the partner will cede 11 per cent and the Government 19 per cent for sale to the public through the Nairobi Stock Exchange.

“In the event of undersubscription then the 11 per cent held by the strategic partner will be disposed of first,” said Ms Koimett. Bidders are allowed to form consortiums so long as the lead investor has a 35 per stake in the management company, 500,000 voice subscribers and invest at least Sh20 billion in annual turnover.

Financial investors holding contracts with leading telephone operators who would manage the project are also eligible to bid individually or under a consortium.

Telkom currently has 350,000 subscribers both for its landline and wireless technology compared to a combined force of 7.5 million subscribers from Safaricom and Celtel.

Both Safaricom and Celtel have in the past complained that Telkom Kenya has been operating a mobile services illegally through its Telkom Wireless product CDMA.

But Mr John Waweru, the Director General of the Communication Commission of Kenya (CCK) said Telkom Kenya has been operating the service through its fixed wireless licence.

“ What Telkom Kenya did was to upgrade their system and technology they have been using to CDMA technology, which provides fixed wireless services but with limited mobility.” said Waweru.

The privatisation will see the Government unbundle 60 per cent of Telkom shares in Safaricom thus making it lose the GSM licence .

The Government has 60 per cent stake in Safaricom Limited through Telkom Kenya and 40 per cent by Vodafone Plc.

Source: Business Daily

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