9 August 2012

Kenya: Essar Considering Selling Its Yu Mobile Network

Kenya's youngest 0mobile network, yUMobile could see new owners take over soon as its parent company, Essar Group, contemplates exiting the Kenyan telecoms market.

The Indian conglomerate is said to be planning to sell its 72 per cent shareholding in Essar Telecom Kenya Limited (ETKL) which operates the yU brand.

According to India's Financial Chronicle on Tuesday the exit has been prompted by the tough operating environment that has seen mobile revenues decline. Though yuMobile Country Manager,Madhur Taneja did not confirm or deny an impending sale, he indicated its local operations are unlikely to be affected by any transaction meant to raise capital.

The company has its eyes set on investing in LTE (4G) in Kenya along with Government. "To meet these future investment needs, we are evaluating an opportunity to raise capital, BNP Paribas has been appointed for the purpose," said Taneja adding this can either be through equity or debt.

"It is at early stages - where we have tied up with BNP to help us evaluate our options on what would be the best funding route, considering our plans for at least the next 5 years". Essar bought the Kenyan telecom business from Econet Wireless in 2008 for Sh12 billion and has invested over Sh40 billion in the operations.

Despite the difficult start, yuMobile has picked up in the last one year in terms of subscriber numbers to earn 8.7 per cent market share, though this does not automatically translate to growth in revenues. According to Communication Commission of Kenya Essar Telecom posted the highest growth 61.6 per cent to reach 2.6 million subscribers by March.

"yuMobile finds the Kenyan market exciting and with a stable economy. We are bullish on the business environment and growth prospects, particularly as in Kenya, the telecom Industry continues to show robust growth," Taneja said. The two Indian firms operating in Kenya- Essar and Bharti Airtel- have been having it rough as the market has shown relatively low price elasticity of demand unlike India where usage increases in response to price cuts.

Essar already exited Uganda's Warid Telecom and Congo operations last year. The conglomerate has expansive global interests in Steel, Oil and Gas, Power, Communications, Shipping Ports and Logistics, Construction and Minerals. Essar Group owns 50 per cent of Kenya Petroleum Refineries Limited(KPRL) whcich it acquired from Shell, BP and Chevron in 2009.

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