The Kenyan government has waived the 20% local ownership requirement for telco group Airtel’s unprofitable operations in the country.
Airtel currently has 5% local ownership but has struggled to find the extra 15%, according to media reports.
“The…
The Kenyan government has waived the 20% local ownership requirement for telco group Airtel’s unprofitable operations in the country.
Airtel currently has 5% local ownership but has struggled to find the extra 15%, according to media reports.
“The government had very little choice but to waive the local ownership requirement,” Binta Drave, equity analyst at frontier market investment bank Exotix, told TelecomFinance. “Airtel is a loss-making company in Kenya and it would be a difficult task for them to agree on a valuation with investors. Instead of needing to find a local investor by April, they have unlimited time now.”
Mobile tariffs in Kenya are some of the lowest in Sub Saharan Africa. Market leader Safaricom is the only profitable mobile operator in Kenya, and its tariffs are at least 30% more expensive than its competitors.
“It makes much more sense for Airtel to wait until it is profitable to find another investor,” added Drave. “I think the government is trying to show that Kenya is investor-friendly. Airtel is one of the biggest telcos in the world and the government wants to encourage investment in Kenya.”
Airtel will have to raise the money from private investors rather than an IPO, as local regulations stipulate a company must be profitable for three years prior to a float.
