Easing of Local Partner Rule to Spur Telecoms Sector in Kenya

Mergers, Acquisitions and Financial Results

A surge in foreign telecoms companies investment is expected after the government relaxed the rule on local ownership. The move is anticipated to inspire investor confidence.

The cap on 80 per cent local ownership is being altered to allow foreign firms to set up operations without a Kenyan partner but be provided with a three year grace period to seek one. Telecommunication rules require that a cell phone firm operating here should have at least a 5th of its shares held by a Kenyan.

This comes almost three days after it was reported that businessman Naushad Merali had sold 15 per cent of the 20 per cent stake he held in Zain Kenya, leaving Kuwaiti-based Zain Group with 95 per cent shareholding.

The Communications Commission of Kenya is said to have relaxed the rule that will enable operators with 100 per cent foreign shareholding to be licensed.

The local ownership requirement is said to be one of the major challenges to new investments. It, for instance, took longer than necessary to license Essar Telkom, then Econet Wireless as local partners were unable to raise the required equity.

The government's bid to get a second national operator was also characterised by controversy after foreign investors failed to secure local partners with necessary funding.

Daily Nation