Kenya: Econet to start operations on schedule

6 May 2004 – According to a Reuters report, South Africa's Econet Wireless International will become Kenya's third cellular phone operator on schedule. The firm is expected to begin operating in 2004, six months after it receives its license, an official said.

Sammy Kirui, Director General of the Communications Commission of Kenya, rejected reports that Econet's local partner had withdrawn from the deal. "We have no indication such a thing has happened," he said.

"Everything is on schedule. We will award the license once they have paid us the money. I expect they should begin operations in six months," Kirui said.

Econet is scheduled to pay US$ 27 million for the license after May 19, once the 60-day legal notice period expires.

Econet won the right to be Kenya's third mobile operator in September 2003. Its victory was challenged by rival bidder Kenya Telecommunications Investment Corp, which filed a suit seeking to block the license. The high court dismissed the case in March, thus enabling the issuance of the license. Econet Wireless International, a sister-firm to Zimbabwe's Econet Holdings, bid more than double what was offered by its nearest rival Mobile Systems International (MSI).

Kirui said bids for a second national fixed-line operator would be opened in two weeks, after which they would declare a reserve price. A reserve price would avoid the controversy that surrounded the auction for the third mobile license, where the winning bid was well below the US$ 55 million fee expected by the government, analysts say.

The use of a reserve price depends on the goals of the government: revenue generation, or sector development. By using a reserve price, the government runs the risk of allowing its desire for revenue generation to hurt potential sector development if the reserve price is high enough to scare off qualified candidate bidders.

In related matters, Kirui, whose organisation is under pressure to speed up liberalisation of the Internet sector, also said the government was waiting for a new policy to be released in June, after the end of the Internet monopoly held by fixed-line provider Telkom Kenya.

Intelecon Research & Consultancy Ltd. 06/05/200

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