[kictanet] RELIANCE MISSES OUT ON SNO LICENCE IN KENYA
Eric Osiakwan
eric at afrispa.org
Mon Mar 19 15:45:51 EAT 2007
Terrific piece, again am sure the Kenyan government would like to
listen given the empirical nature of your submission.
Eric here
On 19 Mar 2007, at 16:25, Lucy Kimani wrote:
> 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)
>> Tel: + 233.21.258800 ext 2031
>> Fax: + 233.21.258811
>> Cell: + 233.244.386792
>> Handle: eosiakwan
>> Snail Mail: Pmb 208, Accra-North
>> Office: BusyInternet - 42 Ring Road Central, Accra-North
>> Blog: http://blogs.law.harvard.edu/eric/
>> Slang: "Tomorrow Now"
>>
>>
>>
>>
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>
>
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Eric M.K Osiakwan
Executive Secretary
AfrISPA (www.afrispa.org)
Tel: + 233.21.258800 ext 2031
Fax: + 233.21.258811
Cell: + 233.244.386792
Handle: eosiakwan
Snail Mail: Pmb 208, Accra-North
Office: BusyInternet - 42 Ring Road Central, Accra-North
Blog: http://blogs.law.harvard.edu/eric/
Slang: "Tomorrow Now"
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