4G joint venture suffers setback as Safaricom pulls out

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Safaricom has announced that it is pulling out of joint national 4G network and is now demanding its own frequency, adding that it had completed laying fibre optic cable in Nairobi, allowing the operator to upgrade its 2G and 3G sites to LTE networks (4G).

Safaricom reckons that the State is taking long to secure shareholder agreements as it gears up to meet growing demand for fast connections by users of tablet computers and smartphones and boost its network quality.

The 4G ownership structure is modelled on a public private partnership, where the government and the operators – including foreign firms – will own stakes in the network equivalent to the capital they inject in the special purpose entity.

The Treasury last year approved the ownership structure of the advanced network that needed the operators to invest Sh10 billion to start construction of the advanced network with the government providing frequencies for a stake.

Now, Safaricom is demanding its own frequency, adding that it had completed laying fibre optic cable in Nairobi, allowing the operator to upgrade its 2G and 3G sites to LTE networks (4G).

“Right now the roll-out of the 4G network through a consortium is not our priority, what we are asking the government is to come up with an open way to issue the frequencies required to operators who are ready to go,” chief executive Bob Collymore told the Business Daily.

“The consortium was just a proposal and nothing had been firmed up, if we get the frequencies we will do it independently.”

The exit of Safaricom will deal a blow to the promoters of the national 4G network because it is one of the few firms among those that have expressed interest in the joint venture that have the capital and need for the network.

The operators that had expressed interest in the joint venture include Airtel, Orange, MTN Business, Liquid Telecoms and Essar Kenya.

Its implementation was expected to provide a business opportunity for hardware vendors such as Ericsson, Huawei and Alcatel-Lucent.

Essar, which operates on 2G network, has also expressed frustration at the slow pace in reaching a deal over the joint venture and has revised its plans to invest in a 3G network instead.

The firm, which owns the yu brands, was not keen on investing in 3G and planned to upgrade to the government-led 4G network to cut on licence fees that stands at about $25 million (Sh2.1 billion) and capex.

Many operators in Africa are only rolling out 3G networks, but the big multinational players are already testing 4G in several markets.

African telecom giants MTN and Vodacom are already running trials in South Africa and Safaricom has also tested the technology.

This comes as Safaricom races to upgrade its network and meet regulatory benchmarks.

The Communications Commission of Kenya earlier said that Safaricom and Airtel did not meet minimum quality of service standards in the year to June and declared rivals, Telkom Kenya and Essar, compliant.