[kictanet] [Fwd: [DigAfrica] Kenya cancels SNO offer to Indian firm]

Tue Mar 20 08:44:53 EAT 2007

They demanded one "too many" privileges

Kenya cancels SNO offer to Indian firm
By A STAFF WRITER

Investigations by The East-African have revealed that Kenya cancelled
negotiations with Reliance Communications of India — the company that
had been negotiating with the government for a licence to operate
both fixed-line and mobile services — because the Indians
demanded "too many" privileges.

Just a day before the deadline within which the Indian company was
asked to formally submit its application, the president of the
company, Punit Garg, wrote to the government making demands that were
way outside the condition of the tender. According to informed
sources, the privileges Reliance wanted were in three sets — namely
duties, relaxation of rules for listing of its local subsidiaries on
the Nairobi Stock Exchange, and a commitment to share infrastructure
from existing mobile companies.

With respect to duties, the Indian company wanted the following.
First, zero import duties on import of telecommunications
infrastructure and equipment; zero import duties on new and used
handsets and zero value-added tax.

The privileges requested with respect to listing requirements were
not only excessive but were of the type that the government could
only give at the risk of bending the rules governing capital markets.

First, the Indian company wanted the government to give it a
commitment that it would allow any local subsidiaries it formed to go
to the market to raise money on the Nairobi Stock Exchange regardless
of whether or not the company met the requirements for listing.

The Indian investor suggested that the local subsidiary it intended
to create be listed on the basis of compliance of the parent company
in India.

Secondly, it wanted the government to permit the listing of at least
10 per cent of the equity of the SNO on the Nairobi Stock Exchange.

Thirdly, it asked that the government allow dual listing of the
company that it intended to establish in Kenya.

On the sharing of infrastructure, the Indian investors wanted
assurances on the sharing of towers, co- location of equipment for
interconnection and long distance networks.

The company argued that duplication of infrastructure in
telecommunications networks was costly. The Indian investor further
argued that only a harmonised system can ensure ready availability at
regulated cost-based tariffs.

Reliance also said that it was not willing to put in an application
without these assurances and privileges.

It is understood that on receiving the demands, a meeting of the
board of the Communications Commission of Kenya was hurriedly
convened at which the regulator formally announced the cancellation
of negotiations with the Indians and the decision to tender afresh.

The government will now be hoping that Vtel of Dubai, who had offered
to pay a whopping $169 million for the licence, will still want to
come and invest in Kenya.

Kenya's telecommunications industry is changing rapidly. The two
mobile players — Safaricom and Celtel — continue to maintain a
stranglehold in a market that more or less operates like a duopoly.

Currently, it is estimated that Safaricom has around 75 per cent of
the market and Celtel 25 per cent.

Both companies have recently been licensed to operate international
gateways.

Kenya tried unsuccessfully to auction an SNO licence in 2003. In May
last year, the CCK put out an international tender for the licence.

The successful bidder, Vtel Ltd, was consequently invited to take up
the offer but failed to do so following disagreements with its local
partners.

In accordance with the tender regulations, the offer was subsequently
withdrawn and extended to Reliance Communications, the second highest
bidders. Upon receipt of the invitation by CCK, Reliance
Communication confirmed that they would take up the offer and
requested more time to enable them to comply with the various
formalities.

The CCK board agreed to the request by the Indian investors and
granted an extension of the application deadline to March 15 this
year.

By the expiry of the set deadline of 4.00 pm on Friday last week, the
Indian investors had not made a formal application for the licence.

http://www.nationmedia.com/eastafrican/current/News/News19030715.htm 
<http://www.nationmedia.com/eastafrican/current/News/News19030715.htm>

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