Essar looks to sell Kenyan wireless unit; pulls out of deal to buy Warid assets in Uganda, Rep. Congo

15 Jun 2011

According to India’s Economic Times, Indian conglomerate the Essar Group is looking to sell off its 70% stake in Kenyan mobile operator Essar Telecommunications Kenya (ETK). The announcement coincides with the Essar Group’s admission that it has pulled out of a long-standing agreement to acquire telecoms assets in Uganda and the Republic of Congo. An unnamed source, with knowledge of the matter, suggested that the Indian firm no longer views telecoms as a core strategic interest. Back in November 2009, Essar reportedly agreed to acquire majority stakes in the Warid Group’s interests in Uganda and the Republic of Congo. However, a press statement attributed to Essar reads: ‘It was mutually decided between the partners – Essar and Warid Group – not to proceed with the deal closure, as certain condition precedents pertaining to government clearance were not met’.

The Economic Times also suggests that that Essar is looking to dispose of its stake in ETK, which operates under the ‘Yu’ banner, for around USD300 million. Essar purchased the stake for around USD150 million, going on to invest a further USD100 million in the cellco. The mobile operator, Kenya’s third largest in terms of subscribers, has struggled to compete with larger rivals Safaricom and Airtel Kenya in Kenya’s notoriously competitive wireless market. An anonymous source told the newspaper that Essar has already approached Bharti Airtel with a view to acquiring ETK, but the Indian firm declined the proposal on account of its ownership of the former Zain Kenya unit. Essar has reportedly approached other operators in Africa, who have not expressed an interest thus far.

TeleGeography notes that South Africa-based MTN has made no secret of its desire to enter the Kenyan telecoms market in recent years, but the mobile phone sector has thus far proved resistant to its overtures. In 2007 MTN was among the companies that bid for a 51% stake in Telkom Kenya, eventually losing out to France Telecom, which now operates the Orange brand in Kenya. Subsequently, MTN was rumoured to be in the running for Zain Africa, which operates Kenya’s second largest mobile network by subscribers, only to be beaten by India’s Bharti Airtel. In November 2010 rumours resurfaced suggesting that MTN was planning to invest in a wireless business to complement its recently acquired broadband provider UUNet (now MTN Business Kenya), with ETK in its sights as a potential acquisition.

Kenya, Essar Telecom Kenya (yu), Warid Congo, Warid Telecom Uganda