KENYA TO SELL SHARES IN TELKOM KENYA, SAFARICOM

Mergers, Acquisitions and Financial Results

Kenya will offer 60 percent of its shareholding in fixed-line monopoly Telkom Kenya on the stock exchange and to a strategic investor after it restructures the loss-making company, President Mwai Kibaki said.

"The government is going to sell 34 percent of the company shares on the Nairobi Stock Exchange," Kibaki told an information technology conference. "We are also looking for a strategic partner to take up to 26 percent of the company's shares."

Information and Communication minister Mutahi Kagwe told reporters that the government would sell 9 percent of its share in leading mobile firm Safaricom to Britain's Vodafone to finance the restructuring of Telkom Kenya.

Telkom Kenya owns 60 percent of shares in Safaricom, which it jointly owns with Vodafone.

Vodafone had offered to purchase an 11 percent stake in Safaricom from Telkom at $100 million but government sources said Kenya had baulked at the prospects of giving the British company control of the mobile operator.

Based on a consultant's reports, the cost of restructuring Telkom Kenya and buying out around 12,000 of its 18,000 employees would range from $154 million to $300 million.

The restructuring is deemed as an essential step to be taken before Telkom's privatisation can go ahead as donors have insisted.

Kenyan businesses have long complained that poor telephone services due largely to Telkom's inefficiencies add a huge cost to doing business in the country, east Africa's biggest economy.

But the government said it had embraced key reforms to boost efficiency in the industry. "In order to encourage more investments in the sector, the government has fully liberalised the sector through opening up of the international gateways to other players and licensing of new operators to compete with Telkom Kenya," Kibaki said.

He said the number of mobile telephone lines had increased to 5.5 million lines from 150,000 in 2000. Kibaki said the government would spend $30 million to roll out broadband wireless in rural areas.

The government has issued eight licences to Internet backbone gateway operators, 15 local loop operators and eight public data network operators, Kibaki said.

"I have directed that additional licences for national telephone operators to be auctioned," he said.

Reuters