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

Edith Adera eadera at idrc.or.ke
Tue Mar 20 15:40:25 EAT 2007 

Well articulated Muriuki!

We need "out of the box" debates on alternative licensing regimes, what has 
worked, what has not (under varying circumstances). I believe we can draw 
on some of these experiences from the region.


regards


At / À 11:30 AM 3/20/2007, Muriuki Mureithi wrote / a écrit:
>Thanks Alice
>The government and indeed the country can easily be arm twisted because the
>focus is on the short term money considerations paid by the applicant but
>the loser  is the country in   terms of the long term build out of the
>network, quality  and lower prices through competition
>
>After the current licensing failed in 1) 8 regional telecommunications 2) 2
>trunking radio 3) SNO on two occasions 4) third cellular --- do we need to
>use the regime again?
>
>If we do the same thing the same way we get the same results. Our attempts
>apart from Kencell licence proves beyond doubt the need of a paradigm shift
>
>I am just wondering loudly how much it costs to go through such a licence
>process  and how such a colossal loss is accounted for
>
>Finally, I expect that any new applicant will demand even more 'privileges'
>because the market is well taken up by competition. The incumbents had
>privileges of the huge market and three years of guaranteed market.  TKL
>itself had a privileged captive market for 118 years.
>
>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: 20 March 2007 08:45
>To: mureithi at summitstrategies.co.ke
>Subject: [kictanet] [Fwd: [DigAfrica] Kenya cancels SNO offer to Indian
>firm]
>
>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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