[kictanet] RELIANCE MISSES OUT ON SNO LICENCE IN KENYA

Mon Mar 19 16:25:33 EAT 2007

Eric and Muriuki,

I too think the issues you raise are extremely important.  The CCK
tendering process definately needs an overhaul!  It has not worked, and
issuing another tender under the same rules will bear the same results,
why keep doing the same thing over and over and expect different results
each time?  Something is broken and it needs to be fixed...

On the 30% and I am borrowing heavily from an article I wrote for ComNews
Africa -- It is no secret that foreign investors will repatriate their
profits 100% of the time, and having 30 percent local stake ensures that
the country at least retains some earnings in the country.  Actually there
is a bigger issue with the 30% that calls on  or challenges the government
to establish exactly what is the root cause for the local investors not
coming up with their share of funds?  The answer lies in the risk averse
banking industry that seems unwilling and unable to take the necessary
risk in order to fund telecommunications projects, thereby leaving a gap
that the government could very easily fill were they to adopt the models
followed by the west, and indeed even the eastern governments, whereby the
government stands in as guarantors to enable enterprenieurs access funding
from banking institutions. One way of doing this, would be to set up a
National Small Business Office (NSBO), along the line of the Small
Business Agency in the US, and the Small Business Service in the UK. In
the United States, the Small Business Administration (SBA) runs several
loan programs that may help a small business secure loans. In these
programs, the SBA guarantees a portion of the loan to the issuing bank and
thus relieves the bank of some of the risk of extending the loan to the
small business,

The National Small Business Office would be an independent body and would
have overall responsibility nationwide for all policies and programs
relating to small businesses, including micro businesses, and start-ups,
would have its own budget, and would be closely monitored by and
answerable directly to the Parliament. The NSBO can be replicated at the
district level. The District Small Business Office (DSBOs) would have
responsibility for running national policies and programs set up by the
NSBO at the national level and would also be directly answerable to
parliament. A particular task appropriate for the NSBO would be in the
setting up of a Kenya EXIM ***Bank that would be responsible for promotion
of exporting activities amongst small businesses to make them more outward
looking and more able to participate in the global marketplace.

The Americans, Japan, Germans, Canadians and the Europeans, and even the
Russians all have similar programs.  There are approximately 23 million
small businesses in the US. These altogether employ more than 50 % of the
private workforce, and generate more than half of the nation’s gross
domestic product (GDP).  In the European Union, small businesses are seen
as largely essential for European employment. Each year, one million new
small businesses set up in the European Union. Small businesses account
for 99.8% of all companies and 65% of business turnover in the European
Union.  In the UK, it is estimated that in 1980 there were about 1.9
million firms but by 1990 this total had risen to 2.8 million. Small
businesses still comprise the great majority of all businesses in the UK
with well over 90 per cent of all businesses having fewer than twenty
employees. At the start of 1997, there were 3.7 million businesses, with
99% of these having less than 50 employees.  The Europeans having recently
increased the loan guarantee amount meaning they recognize the importance
of the program which includes such success stories as Anita Roddick’s body
shop.  Ms. Roddick opened a small beauty product store called the Body
Shop in England in 1976, she had just one goal: survival.  The mother of
two was simply looking for a way to pay the bills with a product line of
natural-based shampoos and lotions. Ms. Roddick was able to purchase her
first store with a small business loan guarantee, almost 30 years later,
Ms. Roddick has ushered in a revolution in the cosmetics industry with a
chain of 2,000 stores around the world. This year, the L'Oreal cosmetics
giant purchased the Body Shop for a little more than $1 billion.

The success of the programs above lies in the importance attached to small
businesses by the governments of each country and the role they play in
national economic development. In the UK, these businesses not only form
the bedrock of the British economy, but they are widely accepted as the
main hub of economic activity in the country. They are seen not just as
job creators, but as creators of wealth. But to top it all, the UK
government firmly believes that small and medium sized businesses are
crucial to a successful enterprise economy and is fully committed to
stimulating the creation, competitiveness and growth of new and small
businesses.  The UK government supports these small businesses with key
policies in place to encourage and maintain a supportive economic
environment.

Thinking outside the box means that the Kenyan government recognizes where
the problem resides, and then address this by recognizing that the 30
percent local stake is crucial to Kenya’s continued growth and
development, and it sees the hidden potential that lies within the 30
percent local stake, and recognizes that abolishing this local stake
should not even be an option.  Small businesses are the backbone of the
any economy, and the government needs to reflect its acceptance and
recognition of this, and the Government must have small business policy at
the top of its agenda. The government has to ensure that it puts concrete
steps in place to ensure that the local investors grow and prosper by
taking an approach that includes fostering an enterprise culture that
encourages innovators and risk takers; providing and maintaining a
supportive economic environment; identifying and removing barriers to
growth and providing high quality business support for the local investors
at all stages of their development.

LK

> Muriuki,
>
> Issues well raised and am sure the government would like to listen.
>
> I would suggest that a KICTANET meeting at which the larger framework
> of vertical as opposed to horizontal layering or unified licensing as
> opposed to Open Access of the communication system is discussed in
> detailed with the pros and cons. This meeting should end with some
> majority consensus and should have all the stakeholders so that as
> sector we are clear at least on the framework of our engagement going
> forward.
>
> I would also submit that a seperate meeting at which the local
> ownership of foreign stake and the mechanism for SME uptake as well
> as growth path is clearly outlined so that whiles you need some big
> fishes now you can also create your own big fishes in the future and
> more so as the sector progress with time.
>
> Eric here
>
>
>
> On 19 Mar 2007, at 11:58, Muriuki Mureithi wrote:
>
>> It is time we reviewed the bidding system this country has
>> adopted   to
>> remove conflict of policy interest and move this country forward.
>> We must
>> address ourselves to the purpose of the licence - is it to  make
>> money for
>> the government to fill treasury gaps or to expand the
>> telecommunications
>> infrastructure. By demanding to have the cake and eat it, we are
>> nowhere   5
>> years after starting the process of SNO and Third Cellular
>> Operator. It is a
>> lesson well documented in countries that Kenya copied ref Senegal
>> and Malawi
>> among others. At the heart of the conflict is a government stating
>> that ICT
>> is the driver of growth   yet put barriers   which cripple the
>> operators
>> even before they start.
>>
>> The requirements of local partnership while sweet for political
>> reasons is
>> difficult to realise because the international partners have
>> inadequate time
>> to assess the right partner and hence the problems for SNO and third
>> cellular
>>
>> We need immediate action
>> - first, scrap the requirement of 30% local owner by the time of
>> application
>> of licence  but require that within 3 years the winner has brought
>> on board
>> local shareholders through the stock exchange and raise ownership
>> to at
>> least 49% by year 5 of operation . This has worked well for Tz
>> - Second, the licence is not a cash cow - we need infrastructure
>> badly now
>> therefore that licence money should be invested to enable the  new
>> entrant
>> to compete with the incumbents  and roll out rapidly .  Licence
>> should not
>> cost more that USD1. What the entrants should compete with is the
>> cash they
>> will invest in Kenya and the timeline.
>> -finally, CCK should address the anomaly of conflicting policies it
>> issues.
>> In 2004, CCK issued a policy which translates to adoption of
>> horizontal
>> licensing regime to move away from vertical licensing regime. The SNO
>> licence is in direct contradiction of the 2004 policy. Was the policy
>> rescinded? The danger of the unified licence is that it denies
>> Kenyan ICT
>> entrepreneurs a natural growth path and condemns Kenya to
>> permanently have
>> few mega operators and many small operators   without a path to
>> migrate from
>> small to big. Should the envisaged fast growing economy to vision
>> 2030 be
>> hinged on few mega operators whose power can sometimes rival the
>> regulator?
>> We need a paradigm shift towards horizontal licensing
>>
>> Cheers
>> Muriuki Mureithi
>>
>> ---------------------------------------
>> Summit Strategies Ltd  -
>> ICT Consultancy  &  Research in  Eastern & Central African markets
>> Contacts : Tel  +254 (20) 3875824 , Cell + 254 (722) 520090,
>> email: mureithi at summitstrategies.co.ke
>>  alternate email : muriuki.mureithi at gmail.com
>>
>>
>>
>>
>> -----Original Message-----
>> From: kictanet-bounces+mureithi=summitstrategies.co.ke at kictanet.or.ke
>> [mailto:kictanet-bounces
>> +mureithi=summitstrategies.co.ke at kictanet.or.ke] On
>> Behalf Of alice
>> Sent: 19 March 2007 09:01
>> To: mureithi at summitstrategies.co.ke
>> Subject: [kictanet] RELIANCE MISSES OUT ON SNO LICENCE IN KENYA
>>
>>  From BALANCING ACT:
>>
>> RELIANCE MISSES OUT ON SNO LICENCE IN KENYA
>>
>> The Communications Commission of Kenya has cancelled a tender for
>> the second
>> national operator (SNO) licence that it had awarded Reliance
>> Communications,
>> after the consortium failed to pay for the fees.
>>
>> This is the second cancellation, after CCK annulled the licence it
>> had given
>> a consortium led by Dubai-based Vtel Holdings in January, for
>> failing to pay
>> the US$169 million (Sh12 billion) licence fee it had bid.
>>
>> Reliance, which was the second highest bidder at US$111 million (Sh7.8
>> billion), was allowed to apply for the licence, but on condition
>> that it pay
>> Sh12 billion to match Vtel's bid. Reliance confirmed that it would
>> take up
>> the offer and requested for more time to prepare for the licence.
>>
>> CCK said last week Reliance had a deadline of March 15. "By the
>> expiry of
>> the said deadline at 4.00 p.m. yesterday (Thursday) Reliance
>> Communications
>> had not made a formal application for the licence as required," CCK
>> said.
>> The Commission's director-general John Waweru said they had
>> resolved to
>> immediately restart the tendering process for the licence.
>> (SOURCE: The Nation)
>>
>>
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>
> Eric M.K Osiakwan
> Executive Secretary
> AfrISPA (www.afrispa.org)
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