Econet Kenya changes name to ward off undesired suitors

Mergers, Acquisitions and Financial Results

Econet Wireless Kenya has changed its name to Essar Telecommunication Kenya Limited to discourage investors from buying off one of its shareholders. The move was initiated by Essar Communication Holdings (ESL), that owns a 34.3 per cent stake in the firm, after suitors got interested in the 35.7 per cent stake owned by Econet Wireless International.

“We are changing the name to stop rumours that have been going on and which are made possible because of the history of this license,” said Mr Srinivasa Iyengar, the firms’s CEO. Econet Wireless Kenya was first licensed to roll out mobile phone services in 2004 but court battles among its shareholders and its failure to pay the license fee delayed its roll out until last November, after Indian firm ESL bought 49 per cent of the 70 per cent stake held by Econet.

Econet Wireless has operations in seven African countries where they have sparked buyout talks. Iyengar said the rumours, and the fact that its financial base is smaller compared to that of Essar, have intensified buyout speculation.

In recent weeks, word has gone around to the effect that South African-owned mobile phone services company MTN Group was keen on buy a stake held by Econet Group.

The speculation disturbed Econet Wireless Kenya management, fearing that it may make the company appear unsettled at a time when it’s struggling to a get a foothold in the competitive local mobile telephony market. In a market where having top talent is emerging as a weapon for market share growth, buyout news were likely to worry the firm’s employees leading to high turnover.

The firm became the fourth mobile operator in the country and has been working to grow its subscriber base in a market that Zain Kenya and Safaricom have maintained a stranglehold, with the twin firms estimated to control about 94 per cent of the market, according to figures by Renaissance Capital.

Essar Telecommunication Kenya claims to have signed up about 250,000 subscribers, which translates to a market share of about 1.5 per cent of Kenya’s 16 million subscribers.

However, Business Daily could not independently verify the figures. Essar Telecommunication Kenya said it would retain its current shareholding structure and the Yu brand that it has been using to market its products in the Kenyan market.

Its other shareholders include Starnet Limited, that owns 26 per cent, while Corporate Africa and Crosslink each owns a two per cent stake.

“We have notified Communication Commission of Kenya (CCK) of the change of name. However, we do not need their approval since shareholding remains the same,” said Mr Iyengar. The firm rollout it services last November after braving fives years of legal and financial setbacks.

This followed the acquisition of a 49 per cent stakes in Econet Wireless International EWI by Essar Communication Holdings (ECHL), a subsidiary of Essar Global. Part of the money that ECHL paid to Econet Wireless International was injected into the Kenyan operation.

Business Daily