Essar denies sale of Kenyan mobile telecom operation

• The telecom firm— which operates under the yuMobile brand—says that the hiring of French banking firm BNP Paribas was to help the firm evaluate possible avenues of raising capital and not to shed its shares as was reported Wednesday by a section of the Indian media.

Essar Telecom Kenya has denied reports that its mother company and largest shareholder—India’s Essar Group— is looking to sell off the business.

The telecom firm— which operates under the yuMobile brand—says that the hiring of French banking firm BNP Paribas was to help the firm evaluate possible avenues of raising capital and not to shed its shares as was reported Wednesday by a section of the Indian media.

Madhur Taneja, the Essar Telecom country manager, said that the deal was only for the purposes of raising funds needed to increase investments in the Kenyan business, which he added stand at Sh40 billion to date.

“To meet these future investment needs, we are evaluating an opportunity to raise capital and BNP Paribas has been appointed for the purpose,” said Mr Taneja.

“Raising capital would not relate to selling the business,” he added.

Reports appearing in India’s Financial Chronicle claimed that the Essar Group had engaged the French firm with the intention of enchasing its majority stake in yuMobile.

“We have appointed BNP Paribas for the sale of our controlling stake of about 72 per cent in yuMobile. We expect the valuation for the same to be several hundred million dollars,” the Chronicle reported, attributing this information to a top Essar official familiar with the plans.

Essar entered the Kenyan market three years ago by buying out stakes held by local shareholders such as Capital Africa and CrossLink.

The balance of about 20 per cent is held by local shareholder Startnet, a company associated with businessmen Peter Kibiriti and Jos Konzolo, a former National Social Security Fund managing Trustee.

Communication Commission of Kenya (CCK) has said that it had not received any report from the telecom firm notifying it of any planned sale of shares.

“I have read the reports about the alleged sale plans but as of today (Wednesday), yuMobile has not formally contacted us on the matter as is required when ownership changes,” said Francis Wangusi, the acting director general of CCK.

Both BNP Paribas and the Essar head office in India did not respond to our queries by the time of going to press.

For yuMobile, this is not the first time that it has had to deal with claims of a planned exit by its parent company.

Mid last year, similar reports indicated that Essar was looking for a buyer to pay approximately Sh25.5 billion ($300 million), about double what it paid in 2008, for its controlling stake.

The latest exit reports come two months after Essar Telecom requested its local shareholders and its parent company for a Sh10.5 billion capital injection.