ICT regulation relaxed to attract foreign investors

Kenya’s fluid ICT sector ownership policy is set to change again as the government moves to spice up investor incentives in an industry that planners say will be critical to economic growth in the next two decades.

To attract new investments into the sector, regulation capping foreign ownership of telecoms companies at 80 per cent is being relaxed to allow foreigners to launch operations without a local partner.

Instead, the investors will get the green light to commence operations with a three-year grace period to find a local partner.

“The rule has been relaxed to license operators with 100 per cent foreign ownership with a grace period of three years to get the mandatory local equity,” said Mr Mutua Muthusi, the assistant director of Communications at the Communications Commission of Kenya (CCK).

The change is expected to ease the entry of new players into the sector as well as inspire investor confidence by removing the burden of compulsory partnership with locals.

This new regulation should also help the State to deal with the challenges it faced during the licensing of the Second National Operator (SNO) as well as avoid the trouble that characterised the licensing of the third mobile operator, Essar.

In the licensing of the SNO, the search for an international bidder was scuttled after foreign conglomerates failed to secure reliable local funding partners, while Essar’s launch in the market was delayed following shareholder wrangles that would have been resolved if the local share-holding element was not present.

“Many times local investors have held foreign investors at ransom with the 20 per cent requirement. We lost two bids previously because of that and of course that is how Mobitelea was born. The new policy guideline would help reduce such incidences,” said Mr Bitange Ndemo, the Information permanent secretary.

The policy change is expected to come under the spotlight should Zain Kenya change hands once again, as is widely anticipated. Zain Kenya is now 95 per cent owned by the Kuwaiti based Zain Group, with the remaining five per cent in local hands.

Zain Kenya appears to have benefited from this change of regulation that allowed Information minister to let Mr Naushad Merali to sell a significant portion of his shareholding in the company without contravening the law.

There has been no official communication on this policy change.

Zain’s benefiting from the three- year window to secure a new local partner also opens speculation as to who would be in the running for the mobile company in local business circles.

Zain Kenya is part of 16 operations in Africa that its parent company is seeking to sell, either as a block or as separate units.

Meanwhile, Asian companies top the list of potential suitors for mobile operator Zain’s African operations.

Zain Group CEO Saad Al Barrack told media that the company was considering talking to three companies — one of whom was Indian — over the weekend.