Ten companies have applied for 4G spectrum licences, which if granted will pave the way for them to begin offering high-speed Internet and mobile phone services.
The Communications Authority of Kenya (CA) said the applicants are part of two different consortiums composed of five companies each.
Their applications were submitted in December last year and are still under evaluation.
The consortiums want a slice of the 700 MHz frequency band that was freed up when Kenya migrated to digital television, and which can be used to deliver 4G services to mobile phone customers.
“The board made a decision sometime towards the end of last year. The decision was to have (the tier two companies) form consortiums and then we give them spectrum on trial for one year. Then if they are successful, they pay the $25 million (spectrum fee),” said CA director-general Francis Wangusi.
The 700 MHz spectrum band is split into three blocks, one of which was assigned to Jamii Telecom last year. This means that two blocks are still up for grabs.
Mr Wangusi said that the CA had opted for the consortium model because there was not enough of the spectrum to go round and “if we were to give to one, then the others might cry foul”.
Two other tier two companies that had applied individually had their bids set aside. The regulator also decided to close this spectrum band to the larger tier one operators (Safaricom #ticker:SCOM, Airtel and Telkom Kenya), saying that they had all received a share of another frequency band, 800MHz, which some are already using to roll out 4G services.
Mr Wangusi declined to name the companies that are gunning for the new spectrum. According to CA data, tier two electronic service providers include Wananchi Group, Liquid Telecom, iWay Africa, and Access Kenya Group. There is no, as of yet, indication that they are part of the consortiums.
Tier two companies have so far been providing fixed and wireless services. The Unified Licensing Framework allows them to venture into the mobile business, but they had not been allocated the spectrum to do so.
One of the options on the table for the consortium members is to jointly invest in a special purpose vehicle that will deploy and run the network on their behalf. The consortium members will then hook up their customers to this network.
Alternatively, consortium members can direct the CA to issue the spectrum to one of their members. This designated company will then roll out the network and lease it out to the rest of the consortium at pre-agreed prices.
While the entry of tier two players into this segment of the business has the potential to disrupt and increase competition, there are several stumbling blocks to overlap.
For one, mobile manufacturers are yet to provide a wide array of cheap devices compatible with the 700Mhz band. Jamii Telecom, which launched its Faiba 4G service last year, has already come up against this challenge.
The tier two companies will also need to invest massively in infrastructure to extend the appeal of their services beyond niche urban populations and they also lack the spectrum to serve customers whose devices are still on 2G and 3G technologies.
The CA says there are plans to allocate additional bands of spectrum to the tier two operators in the future.
The CA also says it is trying to encourage infrastructure sharing. The four companies that already have 4G have been required to share at least 30 per cent of their spectrum.