Monday, June 21, 2010
TELKOM VERSUS SAFARICOM ROUND TWO: TEAMS CABLE!
"We were caught napping," a Safaricom insider told me when controversial new regulations were published. "Guys have been strategizing while we think everything is being played above board."
The strategists, in this case were none other than Telkom Kenya, the former state monopoly provider of telecommunications services.
While SafCom was content to ride its dominant position, TKL was plotting how to bring that dominance to a halt and had roped in the government with various tactics.
Stephen Kiptiness, the suave and ultra-confident head of regulatory affairs at Telkom had sounded the warning shot a few days prior to the explosion over the regulations.
Safaricom, he said should be declared a dominant player. Signs that that was a live wire came when Safaricom immediately protested demanding to tell its side of the story even though the regulations were yet to come out.
When the dust settled down, Safaricom got its reprieve after government decided to invite lawyers from Brussels to look at the regulations and the law of competition in general.
Michael Joseph, the combative CEO of Safaricom, speaking to investors during the annual briefing later said that he had kind of "enjoyed" the bruising battle during the two weeks it took for government to back down somewhat.
It would now appear that he spoke to soon for latest developments now indicate that the two Telecom giants are headed for yet another round of battle - this time over the control of Kenya's undersea fiber optic cable, TEAMS.
Currently, SafCom and Telkom are the two largest shareholders of TEAMS with a stake of 22.5 per cent each. The next biggest stake is owned by Essar at 10 per cent.
But if reports are to be believed, Telkom Kenya is about to ramp up that stake to 42.5 per cent and assume significant dominance over the running of the same including representation on the TEAMS board.
Jaindi Kisero of NMG or Senior as he is known in the business press circles claims in the East African that the Government of Kenya has succumbed to pressure from France Telecom and ceded its 20 per cent stake in TEAMS to Telkom Kenya. This along with a free 3G license, and control of the national fiber optic backbone cable (NOFBI) as well as settlement of outstanding bills owed by Kenya Broadcasting Corporation and other government entities, are some of the concessions that France Telecom has managed to wring out of government for allegedly being cheated in the privatization deal where they paid Sh26billion for a 51 per cent stake in Telkom Kenya.
But Communications Commission of Kenya Director General Charles Njoroge says he is not privy to some of those claims. "They will have to pay me whatever the arrangement is for the license," Njoroge said of TKL.
A Telkom Kenya insider, who admitted that the deal was at extremely high-level (Indeed according to Senior the deal was inked between Treasury Permanent Secretary Joseph Kinyua and France Telecom CEO Michel Barre), it could be that the 3G license fee deal (the license should cost TKL Sh800million) will be a matter of accounting across the books.
On some of the concessions government is giving TKL, he reckons it is to cover for all the plundering and stealing that some GoK people did just before they sold it to France Telecom.
It is however on the TEAMS shareholding deal that trouble seems to be brewing. A senior Safaricom insider told Nairobitech that by no means would they accept the deal. SafCom boss Michael Joseph is the chairman of the TEAMS board.
With Safaricom vowing to block the deal, the stage is set for another round of battle between these two giants for whom the bad blood seems to get worse by the day.
But France Telecom is not backing down. The same insider said FT has taken a bare knuckles approach to the fight. "The French are ruthless!" he said.