KENYAN PS NDEMO WANTS TELECOMS SECTOR TO CONTRIBUTE 10% TO GDP

Telecoms

Seated in his office on the 10th Floor of Teleposta Tower, Nairobi, Dr Bitange Ndemo, the Permanent Secretary in the Ministry of Communications, cuts the image of a confident CEO sitting on the crest of a blue-chip company. Music from his computer is on low volume as we settle down for the interview. But contrary to the aura of satisfaction that surrounds his office, Ndemo is an impatient public officer.

Permanent Secretary in the Ministry of Communications, Dr Bitange Ndemo His restlessness is underpinned by the fact that the telecommunications sector over which he presides remains one of biggest drawbacks to economic progress in the country. Currently, the sector contributes a mere five per cent of Kenya's Gross Domestic Product compared to an average 20 per cent in more developed economies.

Having taken over the position from James Rege at a time when the telecom sector was fast changing, Ndemo has had to learn the ropes fast. In his in-tray is the long overdue restructuring and privatisation of Telkom Kenya, the licensing of a second national operator, and the entry of a third mobile service provider into the market.

Ndemo says his brief is to fully liberalise the telecom sector and raise its contribution to the GDP to above 10 per cent. The starting point, he says, is the streamlining of the licensing requirements to open the sector to more players. The PS reckons that the absence of competition has raised the costs of services and limited the range of products available. This, he says, is against the logic of competition and private investment that is the driver of growth in the ICT sector worldwide.

For a long time players in the telecoms industry have complained that movement towards a liberalised market has been rather slow. Most of them cite the delay in the privatisation of Telkom Kenya as a clear sign that the Government is not committed to opening up the sector to other players.

According to an earlier Government plan, Kenyans were supposed to start enjoying the benefits of a fully liberalised sector in 2005. It was the year the country was expected to usher in the second national fixed line operator and a third mobile phone operator. During the same year, the restructuring and subsequent privatisation of Telkom Kenya was set to take place.

However, all these initiatives came a cropper with much of the delay blamed on courts. "We are not going to be held at ransom by court cases," says Ndemo. "The Government is determined to open the sector to as many players as possible." Ndemo, who was head hunted from the University of Nairobi last November, says he is determined to drive the country to the digital information age.

He believes reforming Telkom Kenya remains central to his strategy. "Much has been said about Telkom, but let me put it that by the end of the year it should be in private hands." Ndemo observed that the time to sell Telkom was now as its value was diminishing. He further observed that there was imminent danger that the value of GSM might decline in favour of Code Division Multiple Access (CDMA)."The benefits of CDMA far outweigh those of GSM and soon nobody will require the GSM licence," said the PS.

The value of Telkom has gone down from $1 billion in 1998 to about $0.7 billion in 2001. Telkom Kenya has been facing a string of challenges as it attempts to transform itself into a profitable firm operating in a competitive environment. The argument to transform Telkom went a notch higher following the end of its five-year monopoly in 2004, opening the market to other operators, but lack of funds has derailed plans to restructure it.

The Government, says Ndemo, needs in excess of Sh12 billion to turn around the firm, with most of the money going towards reducing its staff. Currently, the giant corporation has 17,480 workers yet experts argue that it requires only 6,000. "The staff redundancies will be done in the next few months because the corporation's revenue is on the downward trend," says Ndemo. "Telkom is spending Sh500 million on staff that it doesn't require."

Ndemo disclosed that plans to sell the Government's shares in Safaricom to Vodafone had reached an advanced stage and was only awaiting Cabinet approval. "We are disposing nine per cent of Safaricom to finance the restructuring of Telkom," Ndemo said. A deal, he said, would be concluded as soon as the Cabinet approves the transaction.

On the second national operator, who was meant to offer Telkom competition in the fixed line front, Ndemo observes that it does not make sense to have one. "The licensing of an SNO does not fit with the current telecommunication landscape," observes Ndemo. He says the Communications Commission of Kenya — the industry regulator — had licensed many players, including local loop operator, VSAT operators and international backbone operators, which were previously held by the fixed line operators, a clear sign that it would be a tall order to attract bidders for this license. "We don't need a second operator to compete with Telkom, competition is already there," says Ndemo.

He says this in reference to the many licensed operators who have taken market segments previously run exclusively by Telkom Kenya. These include Flashcom (Local loop), national infrastructure (Kenya Data Networks), VSAT and international backbones. The last two have attracted a string of operators.

Although the Government has moved fast to license a number of companies to provide fixed line services as well as Voice Over Internet Protocol (VOIP), players in the telecom sector led by the mobile operators have continuously decried CCK's reluctance to grant them the international gateway licenses.

Ndemo observes that the two mobile operators would soon be granted international gateways licenses, adding that the move will help bring down the cost of communication as well as improve on accessibility to a wider range of clients.

The East African Standard