Treasury backs CA board’s bid to have Airtel pay licence fee

What you need to know:

Ousted directors say their demand that the operator settles the fee is based on the fact that only Treasury CS has powers to vary government revenue.
The ousted board members yesterday said that the Treasury backed their position and that it was Mr Wangusi who breached the rules when he chose to solely write to Airtel assuring them of a fee waiver without the board’s approval.

The battle for control of Kenya’s telecoms sector regulator yesterday took a new turn after the agency’s embattled board members made public correspondence showing that the Treasury supported their position requiring Airtel to pay the Sh2.1 billion licence renewal fee.

The revelation was made in response to claims by the Communications Authority of Kenya (CA) chairman Ben Gituku and director-general Francis Wangusi last week that the board’s insistence on payment of the licence fee was driven by the quest for bribes.

The letter, which the board members circulated alongside their response to Mr Gituku’s and Mr Wangusi’s bribery claims, shows that Kamau Thugge, the Treasury principal secretary, had made the Treasury’s position on the matter clear, arguing that Airtel never obtained any frequency spectrum from the yuMobile buyout to warrant a waiver.

Dr Thugge stated in a November 24, 2015 letter to Mr Wangusi that only the Cabinet Secretary for Treasury had powers to waive the fee.

“The National Treasury would wish to emphasise that the licence fee paid by the mobile operator (for operations and frequency licence) is revenue of the GoK... The Authority or any other entity, other than the Cabinet Secretary for the National Treasury, has no powers to waiver any Government Revenue,” Dr Thugge said.

The PS then proceeded to direct the CA to immediately begin pursuit of the fee from Airtel.

“The same should immediately, on receipt, be paid to the exchequer and in any case not later than December 31, 2015,” the PS said.

Dr Thugge argued that it was Kenya’s top mobile operator Safaricom that acquired network infrastructure, including associated frequency spectrum licences, during the joint buyout of yuMobile assets in Kenya.

Airtel acquired the operating licence and subscribers, meaning the country’s second-largest operator could not claim to synchronise a licence to frequencies they do not own.

“Airtel therefore did not acquire the frequency spectrum licence from ETKL and has obligation to pay for the renewal of their spectrum licence,” the Treasury said, a position that contradicts Mr Gituku’s and Mr Wangusi’s claim that the Treasury had not taken a position on the matter.

The ousted board members yesterday said in a press statement that the Treasury backed their position and that it was Mr Wangusi who breached the rules when he chose to solely write to Airtel assuring them of a fee waiver without the board’s approval.

The ousted directors also said they did not overturn any decision by the previous board as alleged by Mr Wangusi and Mr Gituku during last week’s press briefing.

They said their refusal to ratify the management’s action was done with the knowledge and understanding “that neither the CA nor the board has powers or authority to waive or vary tax, fees or changes due to the exchequer,” and that Mr Wangusi had acted on his own and without a board resolution purporting to exempt Airtel from paying the Sh2.1 billion fee.

The embattled directors dismissed the bribery claims, insisting that their decision was also based on the recommendations of a staff management committee it had set up to study the matter and advise it.

READ: Wangusi says CA directors wanted bribes from Airtel

ALSO READ: Airtel founder meets Uhuru amid Sh2.7 billion licence row

They also stated that the agreement was reached unanimously and not a majority as Mr Gituku claimed in his statement to the press.

The CA yesterday said that following the advice from the Treasury it wrote a demand letter to Airtel, who wrote back contesting the demand.

Airtel, which paid a $55 million (Sh4.7 billion) fee for its initial 15-year licence, has since moved to court challenging the demand that it must pay the Sh2.1 billion renewal fee.

The telecoms operator argues that the CA had initially agreed to waive the renewal fee, when approving the joint buyout of Essar’s yuMobile’s assets before making an about-turn to demand the fee.

Mr Gituku, who chaired both boards, has, however, insisted that the demand that Airtel pay the fee still stands because it was a board decision.

Mr Wangusi has previously stated that the decision to exempt Airtel from paying the fees hinged on legal advice, stating that the authority did not include settling of initial frequency spectrum licence fees in the conditions it set for Airtel when the telecoms operator was acquiring Essar Telecom’s properties.

Mr Wangusi, Mr Gituku and the then Information PS Joseph Tiampati supported that position.

But the embattled directors and the Treasury have argued that the position has no basis because Airtel never acquired any frequency spectrum from Essar to benefit from such a waiver.

The dispute over the renewal of Airtel’s licence arose from the pre-conditions the CA board set for Airtel and Safaricom’s acquisition of Essar Telecom’s assets.

Key among the requirements was that the two mobile operators pay $5.4 million for variation of the licence terms – that the operators needed to synchronise the acquired assets.

Airtel maintains that the CA had agreed to synchronise the licence with the assets acquired.