Business Daily (Nairobi)
Okuttah Mark
10 January 2008
Econet Wireless Kenya has received a new lease of life following the buy-out of the majority share holder by an Indian mobile telecommunication.
The Indian firm Essar Communication Holdings, a subsidiary of Essar Global, has bought 49 per cent of the Econet Wireless International Ltd, which has 70 per cent controlling shares in the third mobile operator in Kenya.
Econet which is yet to roll out its services, despite being issued with the frequency and licence, has been scouting for a suitable financier since the Communications Commission of Kenya cleared it in September .
By buying into the Econet parent company, Essar intends to inject capital for the roll out of the local third mobile network operator.
According to law firm Anjarwalla and Khanna Advocates, who advised on the deal between Essar Communications Ltd and Econet Wireless International, Essar Communication will provide close to half a billion US dollars for the roll out. "
Essar also intends to bring in a new model which is similar to those used in places like Indonesia, Philippines, India and Pakistan, which will offer competitive pricing and aggressive network roll out" said the firm, noting that the deal would not affect the current ownership structure since shareholding would remain the same.
Prior to the deal, a highly placed source at the information ministry had informed Business Daily that Econet Wireless Kenya had tried to get the foreign financier to be incorporated as one of its partners. This was however turned down by the Government since it was against the licensing rules.
According to the source Econet had informed the ministry that they had secured a partner Essar Communication which had promised them capital to roll out. "Econet had been promised up to $ 1 billion by the company for its network roll out" said the source.
Mr John Waweru, the CCK director general said mobile phone companies cannot sell or alter the composition of their partners without authority.
"We have not received any communication from Econet regarding the issue and if they have to do it they must get clearance from us," he said, adding that Econet filed with it the names of the shareholders in September after meeting the requirement from the regulator.
But Econet can sell the business after rollout, said Mr Waweru.
"At the moment they cannot sell the license, what they can do after the roll out is to sell their shares in the business , but then they will be selling the business and not the licence."
Econet was licensed in 2003 has not been able to roll out due to protracted court battles. However this came to an end after Econet withdrew the cases against CCK and the former information minister Raphael Tuju.
On September 14, Econet met the two outstanding conditions CCK had demanded from it before allocating it with the frequencies and number codes.
It paid the balance of $12 million (Sh840 million) of its $27 million (Sh1.9 billion) licence fee and brought on board local partners. The total fee was about half of the $55 million (Sh3.9 billion) paid by Safaricom and Celtel in 2000.
Econet new local partners replaced the Kenya National Federation of Co-operatives, its previous majority shareholder. The tables turned, however, after KNFC was unable to raise the license fee.
Under the new arrangement, Econet Wireless Kenya now holds 70 per cent of the company, Starnet Limited owns 26 per cent, Corporate Africa two per cent and crosslink two per cent.
In India, Essar communications runs a joint venture with the UK based Vodafone Plc through a brandname Vodafone Essar ( earlier known as Hutchison Essar). The company serves a rapidly growing base of over 32 million subscribers across the country. Vodafone Plc also has 40 per cent shares in the leading mobile telephone provider Safaricom.
Contacted for comment on the impact of possibility of Vodafone teaming up with the third mobile operator, Safaricom chief executive Michael Joseph said he had no knowledge of such plans.
"Econet is talking to an Indian firm Essar but I have no information about the deal. I have heard of rumours about Essar which is a different company from Vodafone-Essar," said Mr Joseph.
An advocate with Anjarwalla and Khanna law firm says that while Essar has a working relationship with Vodafone in India , in Kenya its Essar that has sealed a deal with Econet Wireless International.
" Essar has teamed up with Econet independently and they are coming to compete with Safaricom and Celtel here in Kenya, there are no issues of cross ownership as the deal did not include Vodafone" said the source, adding that the investment in Econet Wireless International was not limited to the Kenyan market alone but to other Africa countries that Econet has previously shown interest in and other new areas that it would like to explore.
Currently Econet Wireless International has presence in eight Africa countries, Europe and the East Asia pacific. The group head quartered in South Africa and runs each operation as a stand alone entity with full local management board control has offices in Bostwana, Burundi, Lesotho, Kenya, New Zealand Zimbabwe, South Africa and UK.
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