Essar Kenya is looking to borrow up to US$200m (Sh16.8bn) in order to finance further technology investments and expansion.
The loss-making telco has appointed BNP Paribas to arrange the financing, which will be staggered over the next three years as it…
Essar Kenya is looking to borrow up to US$200m (Sh16.8bn) in order to finance further technology investments and expansion.
The loss-making telco has appointed BNP Paribas to arrange the financing, which will be staggered over the next three years as it looks to raise US$250m (SH21bn), according to media reports.
India’s Essar Group has an 80% stake in Essar Kenya and is likely to guarantee the loan, according to Binta Drave, Equity Analyst at Exotix. “My understanding is that Essar Group is still happy to invest in Kenya,” she told TelecomFinance.
Drave went on to say that news of the deal was unsurprising given the company’s financials.
“[Essar Kenya’s] competitors Airtel and Orange Kenya are also loss-making,” she commented. “The only way these companies can finance their operations is to rely on their parent company or borrow money.
“Orange Telecom was in a similar situation a few months ago where they had to secure a loan and I think we will see more of this kind of thing in the Kenyan telecoms industry.”
Essar has a 7.7% market share of the Kenyan market compared to market leader Safaricom which has 80.7%.
“Telecoms is a capital-intensive industry and you need to invest in new technology to compete effectively,” added Drave. “Safaricom is the only profitable telco in Kenya and they have been offering Blackberry services for years, whereas Essar Kenya only launched this recently for example.”
