THE SURPRISE withdrawal of Deutsche Telkom was the main feature as bids for Kenya's second national fixed line operator were submitted last week, leaving three players – Telenor Management Systems, Taifacom and African Bell – in the running.

"They called this morning to say they will not pursue their interest," Sammy Kirui, Director General of the Communications Commission of Kenya (CCK) told The EastAfrican on Friday. Although Mr Kirui said the withdrawal did not cast aspersions on the selection process, sources said the secrecy revolving around the reserve price may have been a factor in the decision.

The remaining bidders represent Telenor Group; ZTE/CNC/Kensim; and Pegrume Group/Teleco- mmunications Consultants of India/Tata Infotech/Pre- mier Contacts Agency respectively. The outcome of the bid evaluation process, for which each bidder had to pay $10,000, will be announced by the end of this month.

Mr Kirui said the consortium with the highest financial bid from the technically qualified firms would win the bid "subject to meeting the reserve price." The base price is causing jitters among the bidders, not least because it was only announced at the pre-bidding conference two months ago and remains a mystery even among government officials.

"We have avoided discussion on the reserve price even at government level to avoid information leaks that might influence the process," said Mr Kirui. He added that a method of setting the base price would be arrived at after consultations between CCK and the government, notably the Treasury.

An intention to award the licence to the winning bidder will be advertised in the Kenya Gazette for two months from July with an SNO licence being issued to the winner in early September 2004. The licence will enable the winner to compete with the incumbent operator –Telkom Kenya – in offering fixed line telephone services as well as data, Internet access and satellite communication solutions.

A second national fixed line operator is considered essential in helping Kenya bridge a huge communication gap between rural and urban areas after Telkom Kenya failed to raise the $5.85 billion required to achieve national penetration goals set for 2015. These include raising rural fixed line density from 0.16 to 5 lines per 100 people, with that for the urban areas rising from four to 20 lines per 100.

That means an additional 1.5 million fixed lines are required in the rural areas and another 2.4 million lines in urban areas, several times over the national installed capacity of 350,000 fixed lines. Mr Kirui said the demand for fixed lines in the country currently stands at between 4.5 million and nine million units, depending on the market paradigm employed.

The liberalisation of the fixed line segment comes at a critical juncture as CCK grapples with problems encountered during the failed privatisation of Telkom Kenya, the uncertainty over the licensing of a third cellular operator and the cancellation of two regional telephone operation licences over the licencees' failure to meet the terms for the rollout.Two years ago, the sale of 49 per cent of Telkom Kenya came a cropper after former president Daniel arap Moi's government declared the $320 million winning bid from a consortium led by Zimbabwe's Econet Wireless, too low. "We're not going to sell our assets for a song," declared president Moi, ending a back-and-forth selection process. 

The government has now settled on improving the performance of Telkom Kenya before considering any privatisation option, with new managing director John Waweru on the spot over the intended sacking of 6,000 employees in readiness for competition from the second national operator.

The halt of Telkom's privatisation had informed the push for regional operators and, although three licences covering the entire country were issued, only one – Bell Western – managed to meet the terms of the licence for a rollout in the country's Northeastern Province. The other two licences for Telair and Sasitel were cancelled in August last year after the firms failed to raise Ksh2.1 billion ($26.9 million) required before a rollout could begin.
 
 
 

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