29 March 2014

Kenya: Tough Conditions Set for Yu Mobile Suitors

COMMUNICATIONS Authority of Kenya on Friday issued tough conditions for the proposed sale of Essar Telcom's yuMobile to competitors Safaricom and Airtel Kenya.

The stringent conditions, CAK indicated, will arrest non-competitive tendencies in the mobile phone industry that is staring at possibility of only two players as Telkom's Orange has also given hints of possible exit.

Director general Francis Wangusi said the regulator approved the historic proposed sale to avoid risk of liquidation that would sent "bad shivers" to potential investors.

"It has given as a lesson to rethink about some of the regulatory measures that we may not have properly put in place to safeguard favourable competition," Wangusi said. "Some of them have (led) to the conditions that we have put across for the two players."

In the February 28 application, Airtel sought to acquire Essar's subscribers, GSM lincences and subscriber related contracts.

Safaricom was interested in Essar's passive 453 network sites and associated agreements, leases for the sites, data centre, existing office space, spectrum and residual assets including IT infrastructure.

Safaricom and Airtel are each required to pay CAK Sh471 million($5.4 million) each as a variation of the Essar's 10-year licence terms of Sh2.33 billion($27 million), besides fulfilling all statutory and lincence conditions relating to yU's operations and assets.

The two must also submit for approval an implementation plan for national roaming demonstrating how subscribers will enjoy service across their networks n similar terms and conditions.

Further, they should be prepared to share their agent outlets for money transfer and registration for lines.

Safaricom will separately have to submit framework for infrastructure sharing with other licensed operators on commercial basis as well as hosting mobile virtual network operators by revealing their numbers and time lines.

Airtel will also have to maintain the existing subscribers of yuMobiole under prevailing terms for six months after which it will surrender the number prefix back to the regulator with subscribers choosing to stay or leave Airtel's network.

Essar is required to alert its subscribers on intention to transfer their contracts to Airtel as they are.

"This is a health thing but it should be done within confines and guidance of the rules that would not lead into one of the players to abuse their dominance," WAngusi said. "This will safeguard the confidence of not only the consumers but all those who would like to invest."

CAK, he said, is consultation with Competition Authority of Kenya for issues that could compromise fair play.

Separetely, the CAK board has approved applications by Equity bank, Nakumatt Holdings and Mobile Pay to become Mobile Virtual Network Operators through their subsidiaries.

The licences are subject to the applicants that will all use Airtel infrastructure paying all regulatory and statutory fees, Wangusi said.

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