The Communications Commission of Kenya (CCK) has cancelled the tender for a second national operator (SNO) awarded to the Vtel Consortium. Commissioner General John Waweru on Friday said wrangling between Dubai-based Palestinian firm Vtel Holdings and local partners had stopped the group from meeting its commitments.

"The commission board has resolved to cancel the tender... on the basis of non-compliance with the tender requirements, and to invite the next highest-ranked bidder Reliance to apply," Waweru told a press conference.

Waweru said the Reliance Consortium had a week to apply for the SNO licence after which the commission would re-issue the tender. The Reliance Consortium is led by India's largest private telecom service provider, Reliance Telecoms, and Kenya's Triton Group with Swedtel of Sweden as the technical partner.

Reliance Telecoms is the parent company of Flag Telecom, an undersea cable operator that has teamed up with Kenya Data Networks to connect Mombasa to the UAE.

Waweru said that the Vtel consortium had failed to apply for the licence as required under the tender rules by the expiry of the last deadline - 4pm on January 24. The group had been given three deadline extensions but failed to make an application each time. Once Vtel Holdings wrote to the CCK saying it was trying to replace its local partners.

Waweru added that the tender rules document authorised the Commission to call the bid bond and choose the next highest ranked bidder based on the financial offer. The Commission, he pointed out had already notified both the Vtel and Reliance consortia of the new development in the SNO deal.

Triton, the local investor in Reliance, said the consortium needed to discuss whether it could raise the money. "We have full intentions of taking up the offer," Yagnesh Devani, Triton's executive chairman, told Reuters. Waweru said Reliance would be expected to increase their bid to match that was made by Vtel Consortium and has up mid next week to express their willingness to take up the offer.

Vtel had quoted a financial bid of $169.7 million (Sh12 billion) winning out against Reliance, which bid $111 million (Sh7.7 billion), and India's Mahanagar Telephone Limited at $ 52.1 million (Sh3.6 billion). They won a lucrative unified licence that allows them to provide national mobile telephony, Internet backbone, international voice gateway, commercial VSAT and long-distance voice data services. Waweru said the decision to invite Reliance to apply for the licence was driven by an overriding commitment to adhere by the SNO tender document.

He however, said should the Reliance Consortium be unable to raise their bid or fail to express interest in taking up the new offer, for whatever reason, CCK would have no choice but to re-tender for SNO.

This time though, he added, tender rules would be relaxed featuring among others, the possible dropping the 30 per cent shareholding commitment by foreign investors before a licence is issued.

The East African Standard