Kenya rethinks telecoms rule

In what is seen as a change of heart, the Government of Kenya is in the process of scrapping the rule that requires winning bidders in the telecommunications industry, especially for the Second National Operator's (SNO) licence, to have 30% of their shares owned by local partners.

Speaking during the recently concluded 15th Congress of the East African Regulatory Postal and Telecommunications Organisations (EARPTO), Information and Communications Permanent Secretary Dr Bitange Ndemo, confirmed that the proposal was already before the cabinet.

"The idea is to have the foreign investor who wins the SNO tender operate for one more year during which period the government will hold the 30% equity ownership in trust," said Dr Ndemo.

According to Dr Ndemo, the foreign investor would then be expected to have scouted for a local partner to take 30% ownership. Dr Ndemo's announcement, which was first broken to the media in January, comes in the wake of the government's frustrations at having a Second National Operator as well as a third GSM mobile operator.

Recently, the government has been under pressure to abolish this rule, seen by industry analysts as draconian and a disincentive to foreign investors. Equally frustrated have been foreign investors, as it appears they are often caught up in last minute disagreements with local partners, after winning a lucrative tender. Observers argue that the tendering process does not favour foreign investors, as it does not give them enough time to establish the credibility of local partners.

The liberalisation of the telecommunications industry in Kenya has suffered a setback as successive investors get entangled in complications with their local partners. These include Norway's Telenor; Econet Wireless; Dubai-based VTEL; and, most recently, India's Reliance Communications.

Although, according to the Communications Commission of Kenya, the tender awarded to Reliance was cancelled as the company did not apply for the formal licence by the proposed deadline.

For more on this story, see: http://hana.ru.ac.za/article.cfm?articleID=1369

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