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Kenya agrees to sell stake in telecoms monopoly

Business Day, Wednesday 31 January 2001

NAIROBI - Kenya has finally agreed to the sell a 49% stake in its fixed-line telecommunications monopoly after weeks of delays, newspapers reported on Tuesday. Mount Kenya Telecommunications, a consortium involving Zimbabwe-based group ECONET Wireless International, Dutch group Royal KPN NV (KPN) and SA company Eskom, has agreed to pay $305m for the Telkom Kenya stake, the independent Daily Nation and the East African Standard reported.

The group was one of three consortiums that had their bids rejected by the government in December.

On December 5, the government had been expected to make public which of three bidders - Malaysia Telecom, Mount Kenya Communications or Egyptian group Orascom Telecom - had won the right to become Telkom's strategic partner.

No announcement was made, and nine days later, President Daniel arap Moi was quoted as saying he "was not in a hurry" to privatise the company and would not sell it to foreigners "at a throwaway price".

The original bids from the three groups ranged from $240m from Mount Kenya Telecommunications to $100m from the Malaysian company.

A government official involved in the negotiations said on Thursday that the deal stalled in part because of the size of the bids but also over bidders' insistence that they be able to name their own MD of Telkom once it was privatised.

On Tuesday, both newspapers reported that agreement had been reached that the strategic investor would control the board.

No government official would comment on the reports on Tuesday.

Sure Chimbga, ECONET's corporate communications executive, said negotiations were ongoing but the deal was "almost" finalised.

"There were some circles of the government that thought the (original) offers were a bit on the low side," Chimbga said in a telephone interview. "We believe it's (Telkom) a worthwhile investment for our consortium which is the reason both parties are trying to reach a beneficial understanding."

Telkom, which is reported to have huge liabilities, employs 19 800 people, and with an annual turnover of 22-billion shillings it is the biggest revenue generator of the country's state-run companies.

If the deal does not go through, and the International Monetary Fund (IMF) continues to delay loan disbursements, the already cash-strapped government will face a shortfall of millions of dollars in this year's budget. - Dow Jones Newswires