Vodafone, which has a 40% stake in Safaricom, has already made it clear that it will oppose the granting of a mobile licence to Telkom.
State-owned Telkom Kenya is preparing to roll-out its own mobile telephone service to compete with Safaricom and Celtel in a market that is supposed to witness the entry of at least two other players in the next 10 months.
Well-placed sources told The EastAfrican that Telkom has already received the nod from the market regulator, the Communications Commission of Kenya (CCK), to enter the cellphone market.
Market leader Safaricom - fresh from announcing the biggest pre-tax profits ever in East Africa, of Ksh12.77 billion ($174 million) - must now brace itself for fierce competition in a field that is becoming more and more crowded.
Safaricom's profit performance and the $169 million in licence fees that Vtel of Dubai has just paid for the licence for the second national operator have again demonstrated that Kenya is still undergoing a communications boom.
Competition for Safaricom will be stiffer as the CCK has indicated that it will shortly be allowing Telkom a "unified" licence, similar to that which will be granted to Vtel.
Complications
Telkom's entry into the fray will not be without complications, however, considering that the state-owned firm is still the majority shareholder in Safaricom, where it holds a 60% stake on the government's behalf.
The shareholders' agreement between Telkom Kenya and Vodafone of the UK that prohibits Telkom from dabbling in the mobile telephone business, may have to be renegotiated to reflect the changed circumstances.
With Telkom Kenya having representation on the board of Safaricom, on which both MD Sammy Kirui and chairman Wilson Ndolo Ayah sit, major issues of corporate governance and conflict of interest are likely to arise. The EastAfrican has learnt Vodafone has already made it clear that it will oppose the granting of a mobile licence to Telkom.
The second player in the market, Celtel, has been on an aggressive drive to increase its market share, introducing new products and improving the quality of its services.
The entry into the market of the third mobile operator has been dogged by court battles since September 2003 when Econet Wireless emerged the winner in the tender for the licence with a bid of $27 million.
But it has been unable to roll-out its network because of feuds between its consortium members. Lately, the signs have been that a resolution is in the offing. It is understood that CCK and the company have agreed to withdraw the court cases it has lodged against the government so that it can be granted its licence.
Under the deal, CCK will allow Econet to pay the full licence fee on condition that it abides by the policy requirement of having at least 30% of its shares held by Kenyans before it rolls-out.
It is understood that Econet has indicated that it is willing to allow the Kenya National Federation of Co-operatives (KNFC) to take up its share in the consortium as long as it is willing to pay for it. In the event that they are unable to do so, the shares will be warehoused with a local nominee company to hold them for a specific period of time, by the end of which KNFC will be expected to have raised the money.
And, in case KNFC does not perform by the deadline, the arrangement is that Econet will be allowed to sell the shares to any other willing Kenyans.
Fixed-line operators
The advent of other fixed-line operators is yet another significant development in the fast changing communications regime.
Two major players using the wireless technology known as CMDA have recently entered the scramble for provision of telephone services.
The first, Flashcom, has only recently conducted a major relaunch and has been aggressively recruiting skilled personnel. It has also started above-the-line advertising with FM radio stations. Another CMDA operator, Popote Wireless, has been rolling-out services targeted at both prepaid and postpaid customers.
It has been innovative in its product offerings, having introduced features such as bundled minutes, unlimited Internet access, and unlimited minutes within its network.
Twelve new companies are set to launch local loop operators by the end of this year. One of the effects of the entry of the new players has been a rise in the number of fixed-phone subscribers.
According to statistics from CCK, fixed-line subscribers increased by 25 038 subscribers to 303 905 as of 30 June, representing a 1% penetration rate for this sector.
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