Shareholding proposal heralds reality of 4G network

The Information ministry has laid the ground for the rolling out of Kenya’s 4G network by presenting to Treasury a shareholders’ structure that if approved will see telecom firms jointly own the network.

The ownership structure is a Private Public Partnership (PPP), where the government and the operators –including foreign firms – will own stakes in the network equivalent to the capital they inject in the special purpose entity.

“The Ministry of Finance is still looking at the PPP proposal we made. Once the approval is done, we shall form the special purpose vehicle into which all parties will contribute their capital,” said Bitange Ndemo (pictured), the Information permanent secretary in a telephone interview.

Ownership of the network is set to open a battle for control of the facility, pitting local firms and foreign network developers such as Alcatel-Lucent, Huawei and Ericsson that have been allowed to hold stakes despite opposition from local operators.

“This is an open access platform for any operator whether they invest or not. It will be a TEAMS-like private public partnership and the amount of cash will depend on their commitment.”

The under-sea fibre optic cable TEAMs is owned by Dubai-based Etisalat, Kenya government and 12 telecom firms including the four mobile operators Safaricom, Orange, Airtel and YU and Internet firms such as Kenya Data Networks, Jamii Telecoms and Access Kenya.

The operators pay a fee to access the fibre network and share the profits –a model that the State prefers for the 4G network whose national rollout is estimated to cost more than Sh70 billion.

The winning consortium is set to earn millions of shillings in fees from leasing the network to other firms. International firms can register local affiliates and seek a waiver on the issuance of the 20 per cent shareholding to locals and the bidders must have a turnover of at least Sh500 million.

The fourth generation (4G) or LTE network is a wireless technology with a larger capacity to deliver data and facilitate high-end services such as video conferencing and gaming. Mobile carriers worldwide are increasingly upgrading to LTE networks that support high-speed wireless services as consumers use tablet computers and smartphones to surf the web.

Kenya’s increasingly young and tech-savvy population is buying higher-end handsets that are increasing data usage across the continent. This is emerging as a fertile ground for growth for local mobile operators looking at data market for growth.