Airtel given more time to increase its local shareholders

Airtel Kenya has won a major concession from the government after the parent company was allowed to continue holding a 95 per cent stake in the second largest mobile telephony firm against regulations that cap foreign ownership at 80 per cent.

The firm was given a three-year grace period in early 2009 to grow its local shareholding to at least 20 per cent after Information minister Samuel Poghisio granted businessman Naushad Merali exception to sell 15 per cent of the 20 per cent stake he held in then Zain Kenya to Kuwait-based Zain Group.

The Kuwaiti firm sold its stake to India’s Bharti Airtel in June 2010 and handed the new owners the responsibility to either search for local shareholders or seek an extension in the first quarter of this year.

Airtel says it has been granted extension on the strength that it is yet to settle in the loss-making Kenyan business — a move that will halt the jockeying for the stake among local businessmen.

“Bharti Airtel has in accordance with the government policy obtained the requisite exemption from local shareholder requirements,” said Shivan Bhargava, the chief operating officer of Airtel Kenya.

“Airtel is committed to always comply with the requirements of the government policy.”

Airtel did not disclose the period of the extension, but sources at the Communications Commission of Kenya said it will run for three years or until 2015.

The 15 per cent stake is estimated to be worth Sh5.2 billion based on the $63.75 million (now Sh5.2 billion and then Sh4 billion) that Mr Merali earned when he sold the equivalent stake to Zain Group.

Airtel is planning to invest billions of shillings in network upgrade and there is a feeling the presence of local shareholders could hurt attempts by the operator to raise money from its owners.

To attract new investments into the sector, regulation capping foreign ownership of telecoms companies at 80 per cent in 2009 was relaxed to allow foreigners to launch operations without a local partner.

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

The rule also applies to firms that are facing difficulties raising capital from local shareholders, and they may seek exemption to allow the Kenyan investors dilute their holding below 20 per cent for the new buyers to inject capital.

This change of regulation is what allowed the Information ministry to let Mr Merali sell a significant portion of his shareholding in the company without contravening the law.

Mr Merali has reaped billions of shillings in capital gains in trading in his Airtel Kenya shares.

He owned 40 per cent of the company when his investment company, Sameer Group, jointly launched KenCell Communications with its French partner Vivendi in 2000.