advertisement

Corporate

Airtel founder meets Uhuru amid Sh2.7 billion licence row

President Uhuru Kenyatta with the founder of Bharti Airtel, Mr Sunil Bharti Mittal, when he called on him at State House, Nairobi, February 16, 2016. PHOTO | PSCU
President Uhuru Kenyatta with the founder of Bharti Airtel, Mr Sunil Bharti Mittal, when he called on him at State House, Nairobi, February 16, 2016. PHOTO | PSCU 

Sunil Bharti Mittal, the Indian business mogul who founded the giant telecoms company Bharti Airtel, Tuesday made a quiet but high profile visit to Kenya with a date at State House Nairobi where he met President Uhuru Kenyatta.

Mr Mittal, who is the chief executive of Bharti Enterprises, the conglomerate that owns the telecoms firm Bharti Airtel, made the visit at a time when the company’s local subsidiary Airtel Kenya is grappling with a number of regulatory challenges.

Mr Mittal, accompanied by Airtel Kenya chairman Titus Naikuni, met Mr Kenyatta at State House where they discussed a range of issues, including Airtel’s support of the public schools digitisation programme.

Keen followers of Airtel Kenya’s agenda in recent months will expect that Mr Mittal consulted Mr Kenyatta on the very sticky issues such as its licensing problem, whose renewal the Communications Authority of Kenya (CA) has tied to payment of a Sh2.7 billion fee.

Airtel did not respond to our queries by the time of going to press, but Mr Mittal’s State House visit is in line with those of his peers who have sought the Presidency’s intervention when their companies are facing major regulatory challenges. 

Airtel’s operating licence expired in February last year and its renewal remains uncertain as it fights payment of the fee.

Airtel’s licensing has been entangled in intrigues, with reports that the CA had initially waived the fee before making an about turn to reinstate it.

Internal communications at the CA allege that the recent disbandment of the regulator’s board was linked to the directors’ refusal to play ball on a number of issues, including waiver of Airtel’s licence fee.

“But what seems to have broken the camel’s back was the board insisting that Airtel Kenya must pay a total of Sh2.7 billion owed to the authority in licensee fees,” reads part of the CA correspondence seen by the Business Daily, adding that “(these) fees had initially been waived in unclear circumstances.”

The CA board was disbanded early this month following Attorney- General Githu Muigai’s advice that an appeal challenging the High Court orders sending the team home be withdrawn. 

ICT secretary Joe Mucheru said the seven-member board had ceased to be in office and that a process to establish a new team had started immediately.

The CA board was first disbanded by Justice George Odunga on May 29 last year on grounds that it had been illegally constituted.

The board together with the then ICT secretary Fred Matiang’i moved to the Court of Appeal to contest the ruling.

Airtel reckons that the fee is too high for a small operator like itself, arguing for a review of the amount with no success.

This has seen it rely on an operating licence acquired along with Essar’s (yuMobile) assets in a deal concluded early last year.

The Sh2.7 billion demanded by CA includes Sh2 billion in spectrum fees and Sh30.2 million for initial annual operating fees.

Francis Wangusi, the CA director-general, has demanded that Airtel pays all applicable fees before its licence is renewed and that the Essar licence they are currently operating on was not automatically transferable.

Last year, in a joint buyout valued at Sh12.3 billion, Airtel acquired Essar Telecom’s subscribers, GSM licences and subscriber-related contracts.

Safaricom acquired Essar Telecom’s passive infrastructure located on 453 sites and associated agreements, transfer of the ground leases on which the passive infrastructure sits, and the right to use the spectrum among others.

Airtel had until February 2015 to pay the renewal fee for a 10-year licence following the expiry of the permit issued in 2000. Airtel paid Sh4.7 billion for its first 15-year licence.

In a previous interview with the Business Daily, Airtel Kenya said it was counting on its parent company Bharti to pay the renewal fee – citing the fact that its Kenyan business is yet to break even.

Besides the fee, renewal of Airtel’s licence is also tied to its meeting set service quality targets.

All the four mobile operators, namely Safaricom, Airtel, Orange and yuMobile failed to meet the minimum quality of voice service standards in the year to June 2015.

The CA expects the operator to achieve a score of 80 per cent on the eight indicators, including speech quality, completed calls, call success rates and call drop rate.

Safaricom, Airtel and Telkom Kenya’s Orange tied on a score of 62.5 per cent in the year to June while yuMobile had a 50 per cent rating.

advertisement