How last-minute bid by Nigerians threw yuMobile sale into a spin
From left: Safaricom CEO Bob Collymore, outgoing Airtel Kenya managing director Shivan Bhargava and yuMobile country manager Madhur Taneja during a past Press briefing in Nairobi. Photo/FILE
What you need to know:
Friday verdict by the CAK board came against the backdrop of heavy undercurrents. Out of the blue, a Nigerian entity by the name Mega-tech Engineering Limited, popped out, seeking the support of the regulator to purchase yuMobile.
Available correspondence show that the Nigerians offered to purchase yuMobile for an enterprise value of $200 million (Sh17.4 billion).
yuMobile itself has also questioned the credentials of the Nigerians. But even with the Nigerians out of the scene, chances are the forces arraigned against a deal between Safaricom and yuMobile will resurrect in other forms.
On paper, the Communications Authority of Kenya (CAK) merely set out to lay down conditions which mobile company Safaricom has to meet in the quest to acquire troubled yuMobile’s assets.
But in reality, what the CAK board did last Friday amounted to a re-writing of the rules of competition governing the mobile telecommunication companies.
In total, the number of conditions given to Safaricom and Airtel were 14. The scope of the conditions was so wide as to form a completely new regulatory regime.
The most controversial of them all was the demand that Safaricom must share its money transfer and Sim Card registration centres with its rivals.
Mobile money is regulated by the Central Bank of Kenya — not the CAK.
Secondly, considering that Airtel and Safaricom presently have a dispute before the High Court touching on the very same issue, it was surprising that the CAK board gave direction on a matter that is before the court for adjudication.
Safaricom has not declared whether it will accept the conditions or forget about acquiring yuMobile’s assets altogether.
The Friday verdict by the CAK board came against the backdrop of heavy undercurrents. Out of the blue, a Nigerian entity by the name Mega-tech Engineering Limited, popped out, seeking the support of the regulator to purchase yuMobile.
Said to have friends in high places and big political connections in Kenya, representatives of the Nigerians last week flew into Nairobi in a private jet and started pulling strings — lobbying to be allowed to purchase the company.
Although authorities deny knowledge of having encountered the controversial Nigerians, the Business Daily has seen a letter, dated March 24, 2014, written by the chairman and chief executive of the group, Dr Aliyu Abubakar, confirming interest in purchasing yuMobile even as he sought to the co-operation of the regulator in its plans.
The Business Daily has also confirmed from yuMobile that the Nigerians indeed contacted the vice-president of Essar Services India in charge of mergers and acquisitions, Mr Jayan Dsouza, with an offer to purchase the company’s Kenya subsidiary.
Essar Services of India are the majority shareholders of yuMobile. Available correspondence show that the Nigerians offered to purchase yuMobile for an enterprise value of $200 million (Sh17.4 billion).
Still, doubts continued to linger about the bona fides of the Nigerians. In the first place, reports out of newspapers in Nigeria mention names of some of the fellows behind Megatech Engineering in terms that are not too flattering.
Here in Kenya, records from the company registry show that Megatech Engineering Limited was registered on January 13, 2014 with a Mr Alhaji Aliyu Abubakar and Faifal Mohammed as shareholders and directors. The physical address of the company is stated as KTDA Plaza Tom Mboya Street — an address that does not fit with a big company ready to splash hundreds of millions of dollars on purchasing yuMobile.
Then there is the fact that even yuMobile itself has also questioned the credentials of the Nigerians. In an e-mail response to our questions, the yuMobile chief executive Madhur Taneja disclosed that when the Nigerians first contacted Essar Services of India, they [the Nigerians] claimed they had links with Etisalat and the Mubadala Group of the United Emirates. Mubadala is a $55 billion sovereign wealth fund owned by the government of the United Arab Emirates.
But when Essar Services contacted Etisalat and Mubadala through the French investment banking group — BNP Paribas — Etisalat and Mubadala disowned the Nigerians.
“We cannot establish the credentials of the persons claiming to represent Mubadala and Etisalat,” said Mr Taneja in response to questions by the Business Daily.
Mr Taneja added that as far as yuMobile was concerned the only deal on the table is the one with Safaricom and Airtel.
“We are engaged in discussion with Safaricom and Airtel and we stand committed to the proposed transaction,” he said, indicating that the Nigerians are out of the equation.
But even with the Nigerians out of the scene, chances are the forces arraigned against a deal between Safaricom and yuMobile will resurrect in other forms.
It has emerged that from the very outset, the predisposition of the CAK was to kill the deal outright. Documents seen by the Business Daily show that a technical committee appointed by the CAK director-general Francis Wangusi to consider the application by Safaricom and Airtel had rejected the proposal.
Safaricom’s main argument in its application was that it needed the additional spectrum held by yuMobile to allow it to provide better network coverage and quality of service.
But in a report seen by the Business Daily, the CAK’s technical committee dismissed the argument on grounds that spectrum is not a big factor when it comes to quality of service and that what is critical is network design.
The CAK also argues that experience from other countries shows that there are mobile network operators (MNOs) carrying more subscribers with less amount of spectrum than Safaricom is presently utilising.
“Safaricom utilises 2x20MHZ of spectrum to serve about 20.8 million subscribers while MTN Nigeria utilises 2x20MHZ of spectrum to serve 33.9 million subscribers,” the technical committee argued.
The committee argued that allowing Safaricom to acquire spectrum currently being used by yuMobile would amount to concentrating too many resources in the hands of one player and recommended that yuMobile’s spectrum be surrendered to the regulator for assignment to other players, including new entrants.
What happened after the recommendations were presented to the board is difficult to discern. But the pointers suggest that it was at this stage that some insiders invited the Nigerians to join the fray.
