[kictanet] Kenya in dilemma over transfer of Teams shares to private investors

[Alex Gakuru]

Smell something fishy....

<snip>
The history of the opening up of the
telecommunications sector is littered with cases of
manipulation of privatisation to allow insiders and
connected operatives to acquire shares they have not
paid for. To date, the true owners of an entity by the
name Mobitelea Ventures Ltd that indirectly owns a 10
per cent stake in the country’s first ever GSM mobile
phone operator, Safaricom Ltd, remains unknown. The
investor was procured under the old and opaque
privatisation regime.

In the case of Teams, the government last year
procured 12 investors who will be allotted shares when
the cable goes into operation. Although most of the
companies allotted shares are well-known
telecommunication companies, a number are nevertheless
names that don’t resonate.

The lion’s share of the company has been allocated to
Safaricom Ltd — a 20 per cent stake. In the second
category are Econet Wireless Kenya Ltd (10 per cent),
France Telecom (10 per cent), Kenya Data Networks (10
per cent), Wananchi Telecom Ltd (10 per cent), Telkom
Kenya (10 per cent), Jamii Telecom (3.75 per cent) and
Gilat Satcom (1.25 per cent).

The last category are names that are not too
well-known, including an entity by the name Equip Ltd
(1.25 per cent), Internet Research (1.25 per cent) and
Inhand Ltd (1.25 per cent). The government will retain
a 20 per cent stake in the company.

Under the present arrangement, the chosen investors
must pay 5 per cent of the project’s funding
requirement of $110 million, which will be put in an
escrow account at Standard Chartered Bank of Kenya
Ltd. The balance of what they are expected to pay is
to be remitted when the parties consummate both a
share-subscription agreement and a shareholders’
agreement in April.

Contrary to the general impression, Etisalat of the
UAE has no direct shareholding in Teams. What it has
signed with the government is a construction and
maintenance agreement and a supply contract.

Whichever way one looks at it, these investors must be
laughing all the way to the bank, having clinched a
very sweet deal indeed. Major telecommunications
operators and consumers of bandwidth whose names do
not appear on the investors’ list may find it
difficult to compete.

The investors will be acquiring shares of the asset at
the nominal value of $110 million, but its market
price is bound to hit the roof once the company starts
commercial operations.

In a sense, the Teams model runs contrary to the
conventional model of funding what is known as
“consortium cables” — where entities come together to
fund a proportion of development cost and share the
construction risk, and are allocated capacity
depending on their commitment at all these stages.

In this case, it is the Kenya government that has paid
for the feasibility studies as well as the cost of the
marine survey and engaging Standard Chartered Bank as
the financial arrangers to the project. The government
is the one carrying the construction risk of the
project, meaning that if construction is delayed right
now, it is the one that will bear the extra cost
burden.

With a new privatisation regime having taken effect in
January, and the process of transferring the shares to
private entities still outstanding, the Treasury must
now make a decision on the route to take. According to
the Act, all privatisation transactions must be
handled according to the new law.

“Upon coming into operation of the Act, the commission
shall take over the implementation and management of
any ongoing process leading to a privatisation,” says
section 52 of the Privatisation Act. However, the same
law also says that a privatisation process that is
ongoing should not be reversed to the detriment of any
party.....

<http://www.nationmedia.com/eastafrican/current/News/news170320081.htm>


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