First, the good news - Telkom has definitely taken a turn for the better under Kirui with better service & increased use of CDMA technologies. The recent loan of KShs 5.8 Billion (secured by an ownership interest in Safaricom) will be used to downsize the staff by 60% thus allowing Telkom a lifeline as it cuts costs.
What does surprise me is the lack of advertising by Telkom & its resellers for the CDMA service. Looking through the Sunday Nation (7 April 2007), I did not come across a single ad for the CDMA service while there were ads pushing GSM phones!
What is the story behind Telkom's absence?
The bad news:
- CCK & GoK is being sued by Econet after the license was withdrawn following the internal wrangles that bedeviled the Econet Consortium. Apparently, the Kenyan "partner" could/did not keep their part of the bargain! This includes coming up with the minimum required 30% contribution.
- After the failed take-off of Econet's network, there was a 2nd round of bidding which brought in a high bid of $170 Million from the VTEL consortium but this failed as the local partner was a no-good (Kirinyaga Construction) politically connected crook!
There were rumblings about dropping the 30% local shareholding requirement thus giving VTEL 100% ownership. A pity that VTEL did not do the necessary due diligence on Kirinyaga
So the CCK approached the second highest bidder, Reliance Group & Triton, to step up their bid from $111 Million to $170 Million. The Reliance Consotium balked unless the GOK agreed to certain concessions & condtions were made.
It was naive of CCK & GoK to expect Reliance to pay $60 Million more without additional benefits! Reliance Telecom is a smart & aggressive player in the Indian market & part of a much larger conglomerate. They are not idiots, their bid of $111 million was discounted to include costs of implementing a new network.
The GoK had cold feet about the "higher" bid after including the concessions. So Reliance also bailed.
By rejecting V-Tel's offer & then Reliance's, the GoK & CCk need to rebid... What does that mean?
- Costs of re-bidding
- Delays coz of re-bidding
- Lack of serious applicats since this is bid#3. Fatigue from bidders!
- Telkom's resurgence reduces the incentive for a SNO
- Telkom's imminent privatisation means potential SNO bidders would rather bid for Telkom
- Safaricom & Celtel's price war has reduced the attractiveness of the SNO licenses
- Econet won the court battle over the "withdrawn" license and can now roll out their network
- Finally get it right!
- Newer technologies to be introduced
- Fibre-optic cable to Kenya as part of the deal
- GoK has left money on the table by not accepting VTEL's offer or Reliance's counter-offer. It is unlikely that the next round will raise bids of $170 Million.
- Kenyans are paying higher phone/communication rates coz of inane decisions made by political mandarins/idiots who do not understand free markets & competition!
- Reliance has the capability of building & running a quality communications system, including a fibre-optic undersea cable, that could bolster Kenya's growth as a preferred BPO destination.
- Bid out the SNO to anyone who wants it, whether it is a consortium or not, local participation or not!
- Shelve the SNO but offer "broader" licenses, cheap or free, to existing operators including Access Kenya, Celtel, Safaricom, Flashcom or Popote.
- Force Telkom to share its publicly funded network with others for a modest fee.