Saturday, December 09, 2006

Ecofade II

Part I

Econet Wireless fired off another long letter to the Minister for Information and Communications this week in addition to printing it (2 pages long, badly worded, with typos) in the Nation to explain why they have not rolled out almost two years since they were awarded the third mobile license.

The company which has a history of big talk blames red tape and invisible forces who have continued to manipulate the license process.

Econet's MD writes that they want (then) Minister Raphael Tuju to retract his unauthorised statement cancelling Econet's license and also wants the CCK to issue them with network codes. They claim CCK and various officers have been pushing them to renegotiate with KNFC (an entity who could not pay for 5% of their purpoted 82% ownership), and also lend money to KNFC to enable them to pay for their $12m portion of the license fee.

Econet claims to have already spent $40m on the process (also what happened to applied for jobs at Econet?

Air news

- Early Bird offer from Kenya Airways has round-trip flights to Mombasa at 5,000/= if you take the 6:45 a.m. flights.

- Kisumu Airport should reopen next week when repairs should be done.

- Qatar Air Cargo to serve Nairobi and Eldoret from next year.

December 9 Opportunities


Corporate affairs group leaders (2) at Celtel. apply to by 15/12

Internal audit manager at East African Portland cement. D/L is 22/12

East African tea trade association
- finance/investment analyst
- project management office director
Apply by 22/12 to

Power economist at the Electricity regulatory board. D/L is 29/12

Multi-lingual flight attendants at Kenya Airways - (both male and female) – fluent in Hindi, Arabic, Spanish, Italian, German, French and Portuguese aged 21 – 30 (in addition to the other similar flight crew requirements). D/L is 20/12 for applications to the group human resource director.

Director treasury at Kenya commercial bank. Apply through Hawkins associates

- education sales consultant
- middleware pre-sales consultant
More details their site and apply to by 15/12

Retail, sales & marketing - area business managers (2) at Shell. Apply to by 11/12

Urgent cargo
- chief operating officer
- general manager - freight
Apply to by 18/12


Aga khan foundation young development professional (YDP) program a 1 year leadership and management development program – accepting two streams this year (i) development management (ii) arts, media, or culture management web link here and deadline to is 20/12

Kenya Oil Company (Kenol) management trainees preferably who are fluent in Portuguese or Spanish. apply by 18/12 to the human resource manager.


propaganda said...

Both Econet and KNFC are victims in this fiasco. The senior Kenyan executive Zachary Wazara talks about thought he had this thing locked up for his political friends but Econet refused to play ball. (He spilled the beans in an SA court case a while back.)

E-Nyce said...

The 'Part 1' link gives a 404.

And there's no link to the Nation commentary, assuming there is one available.

KSM airport opening:
Will believe it when I see it - in 3 weeks.

Ssembonge said...

Econet got caught up in the change of guard after the 2002 general elections.

As was with Vodafone, they lined up the palms of the powers that be but once the regime changed they were faced with new operatives who wanted a cut of the business.

Unfortunately for them, politics is everything in Kenya. Not even judicial intervention nor the legal advice from the governments own lawyers has helped their case.

The buck in this case stops with John Michuki who was the first post Moi Telecom's minister. He's the one who's holding them hostage. Tuju's hands are tied as he is surbodinate to Michuki's people still calling the shots in the ministry. Only after Michuki has left the government will Econet be issued the licenses.

Anonymous said...

Econet is the victim. KNFC wanted to invest without putting in money.Econet had ready access to funds as long as their ownership was 51%+.This is a policy by the South African Government. The same kind of facility exists in Rwanda. Unfortunately for KNFC nothing of the sort exists in Kenya.Is it any wonder the Ministry of Trade was poorly rated ? It is a shame anyway since it is the Kenyan consumer who loses. Is the Celtel price reduction an indication that Econet might roll out after all. My advice to our MPs is to start an Investment Fund to create an enabling environment for our investors.

Anonymous said...

@ roughalmasis
govt investemnt fund? are u serious

bankelele said...

propaganda: Can you please ref/link Wazara's comments from the SA case?

E-Nyce: link fixed.

Kisumu route is very busy, KAA has nothing to lose except landing fee income by not fixing the runway

Ssembonge: They got their license in '04 I thought.

roughalmasis: KNFC never had the most convincing reps - you'd see them on TV and you got the impression they had no idea about mobile phones or the money to invest. Then the Cooperatives Minister later declared that they were a bankrupt institution.

Celtel are fighting Safaricom on the price front, but Econet are nowhere near getting started as far I know. Even Telkom wireless has gotten off the ground in the last 3 months and they were long shots

Ssembonge said...

My bad. They won the bid in Sept 03. But I think they were pre-qualified in the KANU days.

My frail mind is failing me.

rfanalyst said...

Pre-qualification happened in 2003 under Michuki. propaganda is somewhat right about the "Senior Kenyan Executive" at Econet having spilled the beans in an SA court... He testified in a suit brought against him by Econet that Econet had no cash and were relying on dodgy tactics, in collusion with some banks and equipment vendors, to posture like they were awash with dollars.

propaganda said...

Banks: Wazara doesn't mention the SA case, but in his letter he talks of how a "senior Kenyan Econet executive" talked a reluctant Econet (Masiyiwa) into applying for the third mobile licence. The guy he was talking about is Mwaura Njiiri, a politically connected player whose name showed up in 2000 in connection with a failed bid to buy Telkom Kenya.

Econet and Njiiri parted ways unhappily. In court in SA, apart from trashing his former employers, Njiiri revealed how he met Michuki (and others) within days of Kibaki forming his government (about a month before CCK invited bids) and ensured the Econet Consortium had the inside track in the bidding. Sorry, no link for this.

Econet have always said they were not planning to spend much cash on this (They have spent just a few million dollars so far). Don't forget they came on as the technical partner and were stretched out in Nigeria and New Zealand at the time. (It's also been their strategy to grow using other people's money, which while risky -- as they learned in Nigeria and here -- is hardly 'dodgy').

Given Njiiri's later falling out with Econet bosses, I'm persuaded by the argument that he brought them in without spelling out the political deals he had made.

Anonymous said...

This ruling is self explanatory : Econet licence stays cancelled, court rules :

itanalyst said...

Propaganda, I couldn't disagree with you more. Econet are somewhat fond of stretching reality beyond its confines. For instance, they have NEVER had an operation in New Zealand, never having sold even one minute of air-time there. By the time they were bidding for Kenya's 3rd GSM licence, the Nigerians had terminated their management contract and Wazara had left Nigeria ignominiously, accused of financial impropriety. So how they could have been over-stretched by operations in 2 countries in which they weren't present beggars belief.

I'm not claiming Njiiri is lily-white in this saga but Econet are no saints either. IMO, they're a broke company with nowhere to turn to and Kenya seems like the one operation that offers a way out, having been kicked out of New Zealand and Papua New Guinea and being left with their Zimbabwean operation with paltry returns.

BTW, I have seen court documents from SA related to the Econet-Njiiri matter and the records would shock many a Kenyan, especially the machinations they embarked on to pull the wool over CCK's eyes during the pre-qualification stages of the 3rd GSM license.

bankelele said...

Ssembonge: long twisted saga, we have all forgetten many facts including the euphoria about more competiont and reduced prices from 3rd mobile operator

rfanalyst: Thanks, I need to research more on the SA case

propaganda: Is Wazara a loose cannon or does he represent the true view of Econet?

itanalyst: With the mobile phone explosion there's money to be made. but if you go in cheaply as it appears in this case, you will not please the cutomer or grow to become a Safaricom or Celtel

propaganda said...

itanalyst: I agree with you that Econet is a small-money company trying to do big-money deals around the globe. You're, however, wrong to assume a business has to be operating to lose money.

Trying to do deals with next-to-no-money, by the way, is not improper: It's what made Donald Trump rich. The danger, however, is that conflicts over control with your partners tend to end in their favour since they are the majority shareholder.

My read is that Econet tried to do too many leveraged deals in a politically sensitive sector and couldn't defend all the territory they claimed. I'm the one saying they were stretched, trying to do too much with just a few million dollars of borrowed money.

In Nigeria, their partners were seduced into dumping them when SA giant Vodacom came calling with cash for a majority stake.

Econet's New Zealand operation exists (since 2000) in the same sense their Kenyan operation exists. At least one credible IT analyst reports they stretched themselves some $25 million before things went wrong in New Zealand. They may bounce back, with money from Chinese giant Huawei.

In Kenya... I think we know how that's going. (Those of us who have actually read Wazara's letter and press coverage of this issue). They are no innocents, but in this instance they ended up tied to partners who have lots of political clout, but no money.

Banks: I don't think Wazara is a loose cannon. I think he was sent here to say things Strive Masiyiwa couldn't say himself. I'd say they want to force a resolution of this thing -- one way or another -- now, before Vtel and Telkom Kenya are ready to roll out.

Both Econet and KNFC are too broke to roll out a network. The only way this moves forward is if Econet manages to dump KNFC*.

When KNFC failed to pay their share of the license fee to CCK in 2004, Econet tried to dump them as shareholders. Four days after Wazara wrote to the CCK confirming Econet would pay $12 million and start looking for replacement shareholders, Tuju cancelled the licence. In March the next year, he dissolved the entire CCK board and suspended Director General Sammy Kirui for even thinking of accepting the deal (Kirui wrote to Barclays SA to explain how the deal would work).

*If KNFC dumps Econet, they have to replace the $1.4 million bid bond, and give away much of that 82 per cent shareholding they are fighting so hard for to a new technical and strategic partner who actually has money. Given the licensing of Vtel and Telkom Kenya with "unified licenses" that include mobile, I don't see anyone wanting to get into bed with KNFC.

rfanalyst said...

Propaganda: I'm in agreement that there's nothing sinister about trying to pull deals with no money and would agree that everyone has to start somewhere. However, Econet can not use that defense because CCK's pre-qualification rules for the 3rd GSM license required that the Technical operator in the consortium have revenues in excess of $ 100 million, which neither Econet nor their broke counterparts KNFC had. Somehow and surprisingly, they were pre-qualified and won the license...

I think this eye-brow raising pre-qualification of a cash strapped outfit that didn't meet minimum requirements, coupled with other commissions and omissions pointed out in this story here indicating Tuju's disgust with CCK's then-DG, Kirui, bear witness that something un-professional was going on, especially as far as Kirui and his senior staff were concerned. According to that story, CCK wrote letters in support of Econet to SA banks, something extremely unethical and inconsistent with the tendering rules; why would CCK be helping a company meet its obligations when the tender rules put the onus of meeting the obligations on the licensee? Kirui is reported to have also written another letter, this time to Papua New Guineas regulator, in support of Econets proposed network in Papua New Guinea.
All these acts point to a rather strange dalliance between Kirui and Econet which must have tainted his objectivity in dealing with them and would lead one to wonder what brief he was holding for them and whether he did not manipulate the 3rd license tender in their favour.

In closing, I think one of the big problems we have in Kenya, especially in the telecoms sector, is a very un-professional and seemingly technically inept regulator. We need look no further than the way things have been bungled so far in that very vital sector in the form of failed activities (bungled 3rd GSM license, bungled first round of Second National Operator, suspension of critical CCK staff,...) and the picture that's being painted is one of an outfit needing a new broom to sweep it clean. Many of us in the industry had hoped that Kibaki's folks would have cleaned the mess up but we're left with little to show after almost 5 years... just a recycling of the old rot a la Moi.

Speaking of the suspension of the DG and senior CCK staff, I am informed this happened after Njiiri gave very incriminating evidence to KACC related to the 3rd GSM license. Little wonder that Kirui was recycled to Telkom Kenya after that... I wonder who his godfather is?

propaganda said...

My last word on this:

I have always thought the prequalification rules applied to the consortium as a whole. (And as Econet was the technical partner, it was KNFC claiming to have $100 million.)

As for the story about "letters in support of Econet", first, can't get the link to work, second, it appears the writer misunderstood the letter.

Barlays SA was ready to pay $12 million for Econet when KNFC and Co failed to pick up their promissory notes. Barclays was worried they would pay and Econet not get the license, so Kirui wrote to assure them all would be well if they paid.

Much reporting on this issue is slanted depending on who is pushing what agenda. Don't trust anyone -- myself included -- until you've checked their facts with reliable sources.

Anonymous said...

I'd like to hear an update about Ndiru Secondary School in Seme location. Any news?


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