Out-Law News 2 min. read

Agreement to promote competition and investment in Kenya’s telecoms sector


The Communications Authority of Kenya (CA) has signed an agreement with the World Bank’s International Finance Corporation (IFC) to promote competition and investment in Kenya’s telecoms sector and strengthen the regulatory environment.

The CA said it wanted to develop “a pro-competition framework for spectrum management in Kenya... ensure a level playing field for investors, facilitate the expansion of wireless communications and support capacity building on competition policy and regulation in the communications sector”.

Under the terms of the agreement, the IFC will provide technical support on “strengthening collaboration” between the CA and the Competition Authority of Kenya (CAK), to “safeguard and encourage effective competition” in the telecoms sector.

The IFC will also assist in the development of a cooperation agreement or memorandum of understanding between the CA and CAK, aimed at drawing up a “common action plan based on international practices and the Kenyan legal framework”, the CA said.

According to the CA, the agreement with the IFC is part of the corporation’s ‘Kenya Regulatory Reform Programme’, which provides advisory services to help boost the development of the private sector in the country.

Kenya liberalised its telecoms sector in 2000, but the IFC said “a first attempt to privatise troubled, state-run Telkom Kenya got bogged down and went nowhere”. “Telkom Kenya enjoyed a monopoly on landline operations in the East African country, but its business suffered as Kenyans eagerly swapped fixed-line phones for mobiles,” the IFC said. “Inefficiency and mounting debt also plagued to company's operations.”

At the request of the Kenyan government, the IFC helped support what it said was Telkom Kenya’s “rebirth”, by helping it secure $81 million in financing for restructuring. The financing was secured by pledging part of Telkom Kenya's 60% stake in Safaricom, “a hugely successful mobile phone operator and one of Kenya’s most profitable companies”, the IFC said.

The IFC then ran a bidding process for 51% of Telkom Kenya, which was won in late 2007 by a consortium led by France Telecom with a bid of $390m. The bid exceeded the $300m reserve price. The IFC also helped Telkom Kenya unbundle its stake in Safaricom, with ownership being transferred to Kenya’s government.

The IFC said: “The successful restructuring and sale of Telkom Kenya, and subsequent listing of Safaricom on Nairobi's stock exchange, both involved participation by foreign investors, injecting confidence back into the country’s economy at a difficult time.”

Safaricom was the first operator in Kenya to launch mobile data services in 2003 on the 2G platform and was the first to launch its 3G platform in 2008. The company said it has more than 3,200 base stations in Kenya, “nearly half of which are 3G-enabled”.

Last December, Safaricom launched its Long Term Evolution (LTE) advanced 4G network, initially covering Nairobi and Mombasa, “before scaling up coverage in other major towns”.

A joint report published in 2012 by the World Bank and African Development Bank, with support from the African Union, said that, at the start of 2012, Africa’s mobile telephony market was “bigger than either the EU or the US. Some 68,000 kilometres of submarine cable and over 615,000 km of “national backbone networks” had already been laid to boost connectivity across the continent, the report said.

According to a survey published last June by Swedish telecommunications firm Ericsson (8-page / 224 KB PDF), total mobile subscriptions in sub-Saharan Africa stood at about 70% at the end of 2013, compared to about 92% globally, and digital technology is “fast becoming a part of everyday life” in the region. Africa’s mobile data traffic is predicted to grow around 20 times between the end of 2013 and the end of 2019, the survey said.

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