The East African Standard (Nairobi)
Michael Omondi
1 March 2006
Nairobi — President Mwai Kibaki yesterday announced plans to sell 60 per cent of the Government's shareholding in Telkom after restructuring the loss-making corporation.
At the same time, the President announced plans to further liberalise the telecommunication sector through licensing of new operators.
"I have directed that the process be expedited for Kenyans to buy 34 per cent of the company's shares through the Nairobi Stock Exchange," Kibaki said at an information technology conference held in Nairobi. "We are also looking for a strategic partner to take 26 per cent of the company's shares."
The President said that the Government is set to offload nine per cent of it shareholding in Safaricom to Britain's Vodaphone Group.
The Government owns 60 per cent of Safaricom and Vodaphone own the remaining 40 per cent.
Last year, Vodaphone had offered to purchase 11 per cent of Safaricom for $100 million (Sh7.2 billion) but the Government declined the offer on fear that it would cede control of the leading mobile operator to the British firm.
"Vodaphone offered to buy 11 per cent at $100 million. This time we are looking for a lot more for nine per cent," said Mutahi Kagwe, the Minister of Information and Communication.
Kagwe said the money would be used to downsize Telkom's workforce to make it attractive to investors before its listing at the Nairobi Stock Exchange.
The minister said the transfer of its shareholding into private hands would take place before January 2007.
Speaking at the function, World Bank County director, Colin Bruce, lauded the move to restructure the giant corporation, saying it's the only way to make it viable in the increasingly competitive telecom sector.
Telkom has been facing a raft of challenges as it attempts to transform itself into a profitable firm operating in a competitive environment.
The push to transform Telkom Kenya went a notch higher following the end of the five-year monopoly in 2004 that opened the market to other operators.
However, lack of funds has hampered plans to restructure the corporation, a move seen as an essential step before privatisation can take place.
Earlier, the Government said it requires in excess of Sh12 billion to restructure Telkom, with a huge chunk of the money going towards reducing its staff.
Currently, the giant corporation has 17,480 workers under its payroll yet studies have shown that it requires only 6,000. Government sources say that the corporation is spending Sh500 million on staff that it does not require annually.
On liberalisation, the President reiterated the Government's plan to open the sector to more players as a way of bringing down the cost of communication as well as increasing access to a wide range of people.
In the past year, the Government has moved fast to license a number of operators to provide fixed line services as well as Voice over Internet protocol (VoIP). So far the Government has issued eight licences to Internet backbone gateway operators, 15 local loop operators and eight public data network operators.
However, industry observes have complained that the movement towards liberalisation has been rather slow, adding that the absence of competition has pushed the cost of services up and limited the range of products available.
"Although tremendous strides have been made not all benefits have been reaped as the cost of communication is still high," lamented Bruce.
He called on the Government to increase its use of fibre optic connectivity instead of satellites, saying it would reduce costs associated with the use of satellite connectivity
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