Econet officially Kenya`s third operator

Johannesburg, 02 Mar 2005

Econet Wireless Kenya (EWK) will be allowed to operate as the country`s third cellular operator, following a High Court ruling that the company`s 15-year GSM licence had been properly issued.

A court action had been brought against the local regulator, the Communications Commission of Kenya (CCK), by two parties who were originally minority shareholders of the EWK bidding consortium, asking for a judicial review of the manner in which the licence was issued.

The minority shareholders, namely the Kenyan Federation of Co-operatives (KNFC) and Rapsel, claimed the licence had been wrongly issued, as the entity to which it had been awarded was not the same as the one that bid, since they had not yet received their shares in the consortium.

According to Zach Wazara, a director at the Econet Wireless Group responsible for the Kenyan project, EWK had gone into partnership with these other shareholders in good faith, but once preparations were begun for the network roll-out, EWK realised that the other players had no money to contribute.

"This court action is one of the strangest things I`ve seen, as these guys wanted to be issued shares before putting up any cash," says Wazara.

"Instead of talking to us and trying to work something out, they chose to take this action against the regulator."

He says a further issue was that these shareholders had made misrepresentations before the court about their level of shareholding, giving the impression they were entitled to more shares than the valid agreements between the consortium parties had provided for.

The shares in EWK that were supposed to be acquired by the KNFC and Rapsel will be sold to other interested Kenyans instead.

"There has been a lot of interest from various Kenyan parties with regards to these shares, and we will certainly meet our obligations under the licence agreement which stipulates that Kenyan stakeholders must hold a minimum of 30% of communication investments," he says.

"All the equipment for setting up EWK has been ordered, we are just awaiting delivery and we aim to move quickly on this, as we already have offices in Kenya and have identified sites for base stations, so it is simply a matter of picking up where we left off when the court action began."

He claims EWK will most likely be able to begin operations in Kenya within the next four months.

"We believe that over time, we will be able to garner some 25% of the Kenyan market, although as the third operator that will obviously take quite a while," says Wazara.

"However, there is plenty of room for growth, as only a small number of the population currently owns cellphones, so there is certainly space for all three operators in a market that is likely to experience quite a bit of growth over the next few years."

The Kenyan project is not part of the Econet/Altech Group joint venture.