The Communications Authority of Kenya (CA) has hit Airtel Kenya with a Sh2 billion frequency spectrum renewal fee demand, piling financial pressure on the loss-making firm.
The telecoms sector regulator has in fresh revelations before the High Court claimed that Airtel is operating at its mercy since its frequency spectrum licence had expired on January 27, 2015 and will only be renewed when it pays the $20.25 million (Sh2.06 billion) fee.
Airtel sued the CA in August, claiming that the regulator had promised to merge its licences with those it had purchased from moribund Yu Mobile in 2014 for $6.976 million (Sh718 million) and that the CA later shifted goalposts by demanding an additional Sh2.06 billion fee for frequency spectrum.
Airtel and Safaricom acquired Yu Mobile’s assets in a joint buyout deal worth Sh12.3 billion.
Under the deal, Airtel acquired Yu’s operating licences and subscribers while Safaricom #ticker:SCOM inherited the collapsed telco’s network, IT and office infrastructure. CA director-general Francis Wangusi now says it is Safaricom that inherited Yu Mobile’s frequency spectrum licence and not Airtel.
Mr Wangusi says that the Sh718 million Airtel paid was only for synchronisation of the telco’s operating licences with those it inherited from Yu Mobile.
“Airtel Kenya did not acquire Essar’s frequency spectrum licence as the same was acquired by Safaricom. Airtel’s frequency spectrum licences expired on January 27, 2015. The CA therefore has a legitimate right to demand payment for renewal of Airtel’s frequency spectrum licence,” Mr Wangusi said.
“The decision to demand for $20.25 million took into account relevant matters; that Airtel’s frequency spectrum licences which were due for renewal on January 27, 2015 required to be renewed and the appropriate licence fee paid in that respect,” he said.
The CA insists that Airtel’s plea for a waiver or reduction of the Sh2.06 billion renewal fee can only be granted by ICT secretary Joe Mucheru.
The CA’s revelation comes just after Airtel’s Delhi-based parent company for the first time made public the inner details of its financial health through an annual financial report indicating that the telecoms operator is heavily indebted. The report showed that Airtel Kenya’s current liabilities of Sh55.3 billion in the year to December 2016 far exceeded its current assets worth Sh9.7 billion, indicating Kenya’s second largest telecoms operator is technically insolvent.
The CA’s demand, if honoured by Airtel, could push the telecoms operator further down the loss-making road or increase its debt load.
Airtel insists that the CA’s demand is illegal and unjust, and wants Justice George Odunga to compel the regulator to unconditionally issue it with a frequency spectrum licence, as it had paid the Sh718 million for permit renewals.
Mr Wangusi now says that Airtel got value for its money, as the Sh718 million saw the CA renew its operating licences (network facilities provider licence, content service provider licence, application service provider licence and international gateway systems and services licence) for 10 years starting January 27, 2015.
Justice Odunga ordered Airtel and the CA to return before him on October 24 for a hearing.